HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/11/2017 - BROADBAND UPDATEDATE:
STAFF:
July 11, 2017
SeonAh Kendall, Economic Policy & Project Manager
Mike Beckstead, Chief Financial Officer
WORK SESSION ITEM
City Council
SUBJECT FOR DISCUSSION
Broadband Update.
EXECUTIVE SUMMARY
The purpose of this item is to provide Council an update on the Broadband Plan work. The discussion will be
focused on the work since the May 2017 work session including: update on the request for proposal (RFP),
learnings from the updated market demand study, retail model business plan, debt capacity and potential ballot
language for the Utilities charter amendment. Additionally, staff will be seeking business model guidance and next
steps.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does Council have desire to further explore a fee/tax to reduce risk?
2. Does Council support bringing a ballot question forward in November?
a. If so, Option 1 or Option 2?
3. Does Council prefer messaging the ballot question as:
b. Focused on Municipal Retail Option Only?
c. Question that allows 3rd Party or Municipal Retail alternatives?
BACKGROUND / DISCUSSION
City Broadband Strategic Objectives
The FCC noted that the real culprit of slow, expensive internet in the U.S. is the lack of competition among
providers. New broadband entrants into the market have a substantial impact on price and service.
The City's 2016 Strategic Plan includes Strategic Objective 3.9 - “Encourage the development of reliable high
speed internet services throughout the community”. The Broadband Plan overall objective is to bring reliable, Gig
speed internet to the city of Fort Collins, while making an informed decision through evaluation of risk and
opportunities. Broadband is defined by the FCC as internet download speed of 25 megabits per second (“Mbps”)
and upload of 3 Mbps or faster.
Additional benefits sought include:
Competitive pricing (residential market pricing at $70/month or less for 1 Gbps and an affordable internet
tier);
Universal coverage across the Growth Management Area;
Underground service for improved reliability; and
Timely implementation to providing services within a reasonable timeframe (less than five years).
During the May 9, 2017 work session, City Council provided feedback to complete a high-level retail model
business plan, while also continuing to explore third-party and/or public/private partnerships through the issuance
of a Request for Proposal (RFP).
July 11, 2017 Page 2
Third Party Option (“3rd Party alternative”)
A third-party model is similar to Google Fiber in Kansas City and Allo in Lincoln, NB. The municipality would look
to attract and partner with a third party to come into the community, finance the network, operate the network and
provide services directly or through other retail providers.
Request for Proposal (RFP) for a Third Party
On May 30, 2017, the City issued a Gigabit Speed Internet Request for Proposal (Attachment 2). The RFP sought
to find a public/private partnership (P3) with an interested party to jointly implement and operate a citywide fiber-
to-the-premise (FTTP) internet service business. The City issued the RFP to attract organizations that have
expertise, experience and financing capability willing to partner with the City to leverage each party’s experience,
while sharing the risks and benefits for providing high-speed, symmetrical, fiber-based solutions to the citizens of
Fort Collins. The RFP closed on July 5, 2017. The City received 11 responses and is currently evaluating
responses to create a short list of potential partners. Next steps also include initial interviews with the short listed
partners, potential further discussions, as well as the determination of future direction and discussions.
Municipal-owned Retail (“Retail Model”)
The municipal utility/retail model is similar to the model that Longmont, CO is providing. The municipality would
build and maintain the physical fiber infrastructure network to pass all premises. The municipality acts as the
internet and voice service provider and manages all customer acquisition and services. The current model does
not include video services; however, based on input from other communities, staff is still evaluating video as a
potential option.
High Level Business Plan – Retail Model
City staff completed a high level business plan for the retail model, as a roadmap that lays out business goals,
background information, critical assumptions, organizational structure, and pro forma financials (based on
information and analysis completed by Uptown Services). The business plan is intended as a communication tool
used to show a complete picture of the details, assumptions, risks and opportunities for decision makers to
determine whether or not to enter the business. (Attachment 3)
Previously, the City engaged Uptown Services to perform a statistically-valid citizen survey to determine the
projected take rate (how many households would subscribe to the City service), estimated at 30.2 percent. During
the development of the retail model business plan, staff re-evaluated the pricing model used in the financial
feasibility based on industry standards and long-term sustainability at the old pricing structure. Additionally,
Comcast announced the deployment of DOCSIS 3.1, technology utilizes Comcast’s existing coaxial cables that
can provide 1 Gbps download and 35 Mbps upload speeds, into the Colorado market. Due to the changes listed
below, Uptown Services recommended re-surveying the community to confirm the take rate:
1. City of Fort Collins revised the Tier 1 (50 Mbps) internet price from $40 to $50 per month
2. City of Fort Collins revised the Tier 2 (1 Gbps) internet price from $50 to $70 per month
3. Comcast’s DOCSIS 3.1 pricing is $159.95 per month without a contract, and $110 per month with a one-year
contract.
4. Comcast is testing a $70 per month promotional offer in Longmont, where NextLight 1 Gbps is offered.
Source Scenario Comcast Offering City Offering Municipal Retail
Take Rate
2016 Survey
n=400
Pre-DOCSIS3.1 1G Not Offered 50M: $40/mo.
1G: $50/mo.*
38.8%
2016 Survey
n=100
Post-DOCSIS3.1 1G: $70/mo.** 30.2%
July 11, 2017 Page 3
Source Scenario Comcast Offering City Offering Municipal Retail
Take Rate
2017 Survey
(Cell A)
n=200
50M: $50/mo.
1G: $70/mo.*
28.2%
2017 Survey
(Cell B)
n=200
1G: $110/mo.** 50M: $50/mo.
1G: $70/mo.*
30.4%
Based on the survey responses, Uptown Services has estimated that the City’s retail model take rate is at 28.2
percent.
Updated Investment
Updated financial feasibility (due to the updated take rate and pricing structure) estimates a total investment of
$130M - $150M.
Network Construction $80M
Engineering, Equipment, Facility and Install $29M
Bond issuance cost and capitalized interest $13M
Total Bond $122M
Working Capital $9M
Total Investment $131M
Contingencies impact the capital requirement and are estimated to be a range due to such items as the estimates
for cost overrun, advanced technology solution costs (active Ethernet vs Gigabit Passive Optical Network),
product offerings, and potential increases to take rates.
Debt Capacity
Current Fort Collins Light and Power (L&P) Capital Improvement Plan and long term financial planning indicate
adequate debt capacity exists within L&P to support the debt issuance (from revenue backed bonds) for the
broadband plan. However, this assumes that L&P needs can be met with rate adjustments and not debt. If the
City were to fulfill the debt through general obligation bonds, an estimated $75M - $100M debt could be issued
without impacting the City’s AAA bond rating.
Strengths and Risks of the Retail Model
In the 2016 survey, the City’s brand recognition and strong customer service reputation as a competitive
advantage. Other advantages include the strong local support and ability to control construction. However, as with
all new businesses, the retail model is not without risks. Risk is influenced by numerous factors including:
Competition risk – incumbents and new entrants
Start-up risk – standing up a new business
Political risk – an example is potential legislative changes at the state or federal level
Governance risk – ability to act in a competitive market (decision making pace, selling vs. order taking,
etc.)
Technology risk – market is rapidly changing; the unknown
Financial risk – worst case scenario, if the retail model fails, every L&P rate payer would pay an estimated
$16 to $17 per month for the life of the debt
Potential Risk Mitigation Option – Retail Model
Staff is currently exploring other options to mitigate risk for the retail model. Options include a potential utility fee
or sales tax. Currently, the broadband plan has only the consumers interested in receiving internet service paying
for services. However, as identified above in financial risk, if the model does not receive the anticipated take rate
July 11, 2017 Page 4
(subscribers), the debt will still need to be paid. An alternative could be a utility fee (estimated at $16 to $17 per
month) or a .40 percent sales tax. Continued discussions are needed.
Utilities Charter Amendment
The retail model requires modifications to the City Charter to allow the existing Light and Power (L&P) enterprise
to expand into telecommunications. Initial analysis assumes financing the capital cost through revenue bonds
issued and backed by the rate-making strength of the L&P enterprise. Although another option for structuring the
retail model might be the creation of a free-standing new utility enterprise for telecommunications, including
broadband, such a structure would not permit revenue bonds to be secured by L&P electric service revenues and
financing may be an impediment to such a structure. A more detailed analysis of funding options would be a part
of the next step business planning phase. Modification of the governance process for telecommunications would
also be recommended to allow effective operations within a competitive environment, which is not part of the
current L&P business model.
Option 1 Option 2
Allows the City to add telecommunications directly (municipal retail) or
indirectly (3rd Party or public/private partnership) within L&P Enterprise
X X
Telecommunications within new 5th Utility to support direct services
(municipal retail) or indirect services (public/private partnership)
X
Executive sessions and ability to delegate X X
Authorization of L&P revenue bonds up to $150M X X
Authorization of general obligation bonds up to $150M X
Recommendation
Staff is recommending Option 1, which supports municipal retail broadband within the existing L&P enterprise and
allows the authorization to leverage L&P revenue bonds to support telecommunication broadband.
Next Steps
City staff is working to refine work scope with consultants brought on to develop a municipal broadband
implementation plan. Additionally, staff is proposing to continue discussions with RFP respondents while moving
forward on drafting ballot language for a November 2017 Charter Amendment to propose the addition of
telecommunication to the Utilities charter, as well as governance structure.
ATTACHMENTS
1. Request for Proposal (RFP)-8550 Gigabit Speed Internet (PDF)
2. Draft Ballot Question and Charter Amendment Options 1 & 2 (PDF)
3. Draft Broadband Retail Business Plan (PDF)
4. Powerpoint presentation (PDF)
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REQUEST FOR PROPOSAL (RFP)
8550 GIGABIT SPEED INTERNET
I. Introduction
The City of Fort Collins (the “City”) issues this Request for P r oposal (RFP) for the purpose
of exploring the opportunity to form a Public Private Partnership (P3) with an interested party to
jointly implement and operate a Citywide fiber-to-the-premises (FTTP) internet service business.
This initiative will enhance the broadband connectivity of the City’s residents, businesses, and
local education institutions by expanding the range and quality of available broadband and data
transport services.
The City has initiated this RFP to attract organizations that have expertise, experience and
financing capability willing to explore the opportunity to form a P3 to leverage each party’s
experience, share in the risks and benefits, and jointly develop a high speed, symmetrical fiber
based internet services business within the Growth Management Area (GMA) of Fort Collins. The
City seeks input from potential partners to assess possibilities, capabilities, and business model
alternatives and the terms and conditions under which a P3 could be assembled to accomplish such a
project. The City has a high degree of trust and brand recognition within the community.
We are interested in potential partners who bring a strong technical and business operating
knowledge of the internet services business to jointly develop a robust infrastructure to provide
ubiquitous Gigabit speed internet access within a reasonable timeframe (3 – 5 years).
Each market and business model represents a unique combination of opportunities and
challenges. The City has identified two business models to explore; a municipal-owned and
operated (“retail”) where the City independently builds and operates a fiber network and offers
internet services across that network or a P3 where the City works in partnership with a private
entity to build and operate a fiber network and offer internet services across that network. The
City is not seeking responses from vendors for the retail model at this time. We seek responses
that focus on the P3 that share technological capabilities, operational responsibilities, and
financial risk between the City and the successful respondent(s). The City will also consider a
range of construction, operation, and ownership models associated with public-private
partnership, non-exclusive franchise, and other appropriate innovative business models.
The City, local education institutions, data oriented businesses, residents and community leaders
recognize the increased importance of Gigabit speed internet serves for everyone in the
community.
Responses to this RFP should state how the respondent’s approach will further the City’s goals to
deploy cost effective FTTP Gigabit speed internet throughout the City.
Financial Services
Purchasing Division
215 N. Mason St. 2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6775
970.221.6707- fax
fcgov.com/purchasing
ATTACHMENT 1
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We encourage respondents to share their expertise, which may be used to shape the direction
and formation of the network. Respondents may work together to respond to this RFP. The City is
open to creative solutions that will maximize the efficiency of the investment, share in the
business risk while providing reliable, cost competitive, and high-quality services with outstanding
customer service to meet the needs of its citizens.
We welcome the responses of all respondents, including incumbent service providers, as well as
competitive providers, nonprofit organizations, public cooperatives, nontraditional
providers, and other entities.
II. RFP Objectives and Scope
The City’s 2016 Strategic Plan outlined objective 3.9 – Encourage the development of reliable, high
speed internet services throughout the community. In addition, secondary factors to this objective
include:
x A Network reaching all residents of the Fort Collins GMA
x Timely implementation – 4-5 year build out
x Competitive market pricing
x Outstanding customer service.
The City’s objectives of the RFP process are as follows:
1. Identify entities interested in engaging with the City to make fiber-to-the-premise with
symmetrical Gigabit speed internet available within the GMA of Fort Collins.
2. Identify and evaluate innovative and cost-effective ways to partner and leverage the
strengths and abilities of both parties to deploy Gigabit speed broadband Citywide.
3. At the City’s option, meet with select respondents for in-depth discussions regarding the
entities proposed approach, capability, business model, and terms & conditions and jointly
develop details of a potential P3 partnership, non-exclusive franchise, or other business
arrangement.
Based on the outcome of the RFP and subsequent discussions with select entities, the City will
determine next steps based on the City’s best interest. Next steps may include, but are not
limited to:
- Negotiate with one (1) or more entity(s) a business arrangement to deploy Gigabit speed
internet Citywide; or
- Initiate a new City utility to launch Gigabit speed internet independently without a
private partner.
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III. Project Background and Preliminary Market Demand
Fort Collins is nestled against the foothills of the Rocky Mountains and alongside the banks of the
Cache La Poudre River. With an estimated population of 167,000 (approximately 66,500 housing
units and 8,000 small and medium business premises), Fort Collins is among the nation’s fastest
growing metropolitan areas. The City includes many assets and amenities that provide a
competitive advantage including: Colorado State University, abundant natural resources and
agricultural land, highly educated and creative workforce, a historic downtown, and many miles of
trails, parks and bike paths. Fort Collins has one of the highest rates of patents per capita in the
world with a major research institution – Colorado State University – a cluster of federal
laboratories and such high-tech companies as Hewlett-Packard, AMD, Intel and Broadcom.
The City of Fort Collins is a full-service municipality that operates under the Council/Manager
form of government. The City’s mission, vision and values provide the foundation for the City of
Fort Collins’ 2015-2016 Strategic Plan’s seven key outcome areas: Community and Neighborhood
Livability, Culture and Recreation, Economic Health, Environmental Health, Safe Community,
Transportation and High Performing Government. The City’s strong commitment to providing
world-class municipal services for an exceptional community underlies every strategic objective.
More information about the City’s Strategic Plan can be found at:
http://www.fcgov.com/citymanager/pdf/strategic-plan-2015.pdf
The City also makes certain GIS data sets available on line that may be helpful to consultant
responding to this RFP. This data is available at http://www.fcgov.com/gis/downloadable-
data.php.
The City of Fort Collins’ Broadband Plan’s overall objective is to bring ultra-high speed internet to
the City of Fort Collins while making an informed decision through evaluation of risks and
opportunities. Additional benefits being sought include competitive pricing, an affordable
Internet tier price for low income residence, universal coverage throughout the Fort Collins
growth management area (GMA), underground infrastructure for improved reliability, and
providing services within a reasonable timeframe.
On November 3, 2015, 83% of Fort Collins voters supported Ballot Issue 2B, which overturned
Colorado Senate Bill 05- 152, removing legal barriers for the City’s involvement, direct or indirect,
in providing telecommunication services. This vote allows the City and citizens to consider and
pursue the best decisions based on the needs and desires of the community.
Fort Collins Market Demand Study
The City, in collaboration with a third party consultant firm, completed an initial market demand
study in March 2016, including three market segment (residential, small business, large
business/institutional) studies to identify unique needs (services) by sector of population and/or
geographical areas, and estimate demand and take-rate (i.e., potential subscribership rate)
assumptions by sector. A summary of the survey findings follows:
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Residential Market
Fort Collins has approximately 66,500 residences. The residential market demand survey asks
questions around Internet, voice and video services as part of the overall inputs for the financial
feasibility analysis. A high speed Internet service is the primary focus of the broadband study, but
the appeal of bundling services at a minimal cost is being investigated. The study confirmed that
almost all Fort Collins households use the Internet. Governing.com’s “America’s Most Connected
Cities” stated that 91.4% of Fort Collins residents have at least one wired connection. Ninety-nine
percent of Fort Collins households surveyed use Internet at home. Of these connected homes,
cable modem and digital subscriber lines (DSL) have the vast majority of the market share at 94%.
Additionally, the study indicated that Internet usage is prevalent across all income and age
groups.
Questions around customer service satisfaction levels were also surveyed, as this plays a role in
the market demand for alternative broadband services. Respondents were asked to rank
customer satisfaction from a scale of 1 - 10, with 10 being “totally satisfied” and 1 being “not at all
satisfied,” by service categories: cable television, satellite television, non-pay television (i.e.,
antenna, basic channels), DSL, cable modem, telephone and electric utility. The average customer
satisfaction was high for electric utility at a mean rating of 8.7, while the average mean for DSL
was 6.8 and cable modem was 6.6. Sixty-four percent of the respondents rated the City’s Utility
brand a 9 or 10 rating. Other internet services had significantly lower customer service
satisfaction. Lower prices, increased Internet speed and reliability dominate the wish list of
service improvements respondents identified for broadband. Branding and bundling were
secondary in importance. Additionally, 81% of respondents acknowledged the importance of
having low cost, high-speed Internet.
Additional information can be found by entering the following into your internet browser:
http://citydocs.fcgov.com/?cmd=convert&vid=72&docid=2697600&dt=&doc_download_date=AP
R-26-2016&ITEM_NUMBER=
Small to Mid-Size Business Survey
The City of Fort Collins has approximately 8,000 small- to mid-size businesses (SMB). A similar
survey was deployed to the small-to-mid-size business segment. The survey found that Comcast
and CenturyLink are the only two Internet Service Providers (ISPs) with SMB market share in Fort
Collins (about 96% of respondents). Two-thirds of SMB respondents in Fort Collins are under
contract for their Internet and voice services. Additionally, SMB respondents had similar
responses to the residential respondents in regard to customer satisfaction by service and
customer needs. One item to note is that SMBs put a larger emphasis on the need for improved
reliability, most likely due to reliance on technology and the Internet for business operations.
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Large Business/Institution Qualitative Survey
The objective of the large business/institution qualitative survey is to qualify the current and
future capacity needs, unmet needs, and interest and level of support for the development and
implementation of a fiber broadband network. Some of those interviewed could be potential
customers as major commercial accounts, or they could be an influencer in the community. In
total 24 interviews were conducted and the responses aggregated for confidentiality. The survey
found that due to multiple incumbent providers competing in the large business/institution
segment, fiber is not only deployed, but activated to many of these business locations. Advance
data needs are being met with dedicated connections for the business/institutions sole usage. As
a result, the City does not see large business/institutional organizations as primary customers of
the City’s broadband efforts.
Estimated Subscribership (“Take”) Rate
The consultants engaged by the City utilized a conservative research technique from the
Packaged Goods sector to estimate potential subscribership rate. This technique has been utilized
for over 30-years and was developed as firms realized research respondents, for various reasons,
overstate purchase intentions during research as compared to the eventual penetration of a
product that was commercially launched. Municipal systems, which are not-for-profit enterprises,
measure a broadband project “success” by the level of their “take rate” - that is, the percentage
of potential subscribers who are offered the service that actually subscribe. The consultants
estimated that the take rate for residential Internet service in Fort Collins at 38.8% and 45% for
small business (i.e., 38.8% of residents are estimated to subscribe to the fiber network, if offered).
With the potential launch of DOCSIS3.1 by Comcast, the residential take rate estimate has been
revised to 30.2% as a result of the additional anticipated competition within the market place.
Online Broadband Survey
Due to interest, staff made the majority of the residential phone survey available online to
anyone who wanted to participate. This was not intended to be statistically valid, but rather to
allow more residents to engage in the conversation. Over 1,800 responses were received and the
results were in line with the statistically valid, residential phone survey. The exception being that
online questionnaire saw a higher response from younger demographics. Major themes include
improvements in:
x Speed (33%)
x Price (26%)
x Reliability (17%)
x Customer Service (10%)
x Miscellaneous (14%)
IV. RFP SUBMITTAL
Qualified entities who may have an interest in engaging with the City to deploy Gigabit speed
internet are encourage to respond to this RFP.
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Respondents are encourage, but not required to provide the following information in response to
this RFP.
1. Company name, address, and website.
2. Organization Type (Corporation, Subsidiary, Partnership, Individual, Joint Venture, or
Other).
3. The name and contact information (email, phone) of the company representative
responsible for providing further information.
4. A brief overview of the company’s capabilities, experience and role in planning,
engineering, implementing, or operating Gigabit speed internet particularly in
collaboration with a public municipality.
5. Provide evidence your firm is financially strong including recent (last two fiscal years)
audited financial statement including balance sheet and income statement.
6. A brief, high-level description of company’s solution/product(s) including but not
limited to:
a. Address key components of your business model including the elements of the
network implementation your firm supports and proposed ownership
structure.
b. Summarize project cost and cost of service.
c. Identify roles and responsibilities of the partnership.
d. Identify financing and funding elements including the City’s level of
participation.
e. Identify key provisions required to enter into a partnership or non-exclusive
franchise arrangement including important terms & conditions.
f. Highlight the unique features of the solution/product(s), including a general
description of the program and any unique benefits provided by your firm.
7. All respondents must complete and execute the Non-Disclosure Agreement
(Appendix A).
As part of the City’s commitment to Sustainable Purchasing, RFP response submission via email is
preferred. RFP response submittals shall be submitted in a single Microsoft Word or PDF file
under 20MB and e-mailed to: purchasing@fcgov.com. If electing to submit a hard copy RFP
response instead, please mail to the City of Fort Collins' Purchasing Division, 215 North Mason St.,
2nd floor, Fort Collins, Colorado 80524. RFP response submittals must be received by 5:00 p.m.
(our clock), July 5, 2017 and referenced as RFP 8550. If mailed, the address is P.O. Box 580, Fort
Collins, 80522-0580. Please note additional time is required for RFP responses mailed to the PO
Box to be received at the Purchasing Office.
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V. RFP SCHEDULE
The preliminary RFP schedule follows:
• Issuance of RFP May 30, 2017
• RFP Question Deadline June 23, 2017
• RFP Responses Due July 5, 2017
• Discussion Period Starts July 10, 2017
• Public Engagement On-Going
VI. QUESTIONS
Questions concerning the RFP should be directed to the Project Manager SeonAh Kendall, 970-
416-2164, skendall@fcgov.com. The deadline for questions is June 23, 2017.
Questions regarding the RFP process should be directed to Gerry Paul, Purchasing Director at 970-
221-6779, gspaul@fcgov.com.
VII. MISCELLANEOUS
A copy of the RFP may be obtained at www.rockymountainbidsystem.com. The NIGP Commodity
Code is 915, Communications and Media Related Services which includes 91551 Information
Highway Electronic Services (Internet, World Wide Web, etc.)
The City is not obligated for any cost incurred whatsoever by firms in the preparation of the
Request for Information or potential travel to Fort Collins.
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Appendix A: Mutual Non-Disclosure Agreement
Please provide two signed copies of the following Mutual Non-Disclosure Agreement.
MUTUAL NON-DISCLOSURE AGREEMENT
THIS MUTUAL NON-DISCLOSURE AGREEMENT (this “Agreement”), effective as of the day of
2016, is between the City of Fort Collins, a Colorado home rule municipal corporation
(the “City”), and (“Vendor”). The City and Vendor may
hereinafter be referred to individually as a “Party” or collectively as the “Parties.”
WHEREAS, Vendor and the City m a y engage in discussions concerning Gigabit speed internet
services and a potential business arrangement (the “Purpose”); and
WHEREAS, in the course of negotiations or communications, each Partymaydisclosetoand/or receive from
the other Party certain information belonging to the disclosing Party or its affiliates (collectively, the
“Discloser”) that includes trade secrets, privileged information, or confidential commercial and
information (“Confidential Information”);
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and promises set forth
herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. Records maintained by the City are subject to public disclosure pursuant to the Colorado Open
Records Act (“CORA”). Certain confidential business records are exempt. If Vendor provides to the City
documents that include trade secrets, privileged information, or confidential commercial or financial
information, Vendor shall segregate any documents including such information from other documents
provided to the City and shall clearly identify such documents with a stamp, watermark or other clear mark
identifying the documents as confidential pursuant to CORA.
2. The Party receiving Confidential Information (the “Recipient”) (i) shall use such Confidential
Information only for the Purpose; (ii) shall reproduce such Confidential Information only to the extent
necessary for the Purpose; (iii) shall restrict disclosure of such Confidential Information to its, and its
affiliates', employees and agents who need to know such Confidential Information to carry out the
Purpose and who are not direct competitors of the Discloser (and require such employees and agents to
undertake confidentiality and use obligations at least as restrictive as those Recipient assumes herein);
(iv) shall not disclose such Confidential Information to any other Party without prior written approval of
Discloser; and (v) shall protect such Confidential Information with at least the same degree of care as it
normally exercises to protect its own proprietary information of a similar nature, which shall be no less
than reasonable care. If Recipient discloses Confidential Information to an employee, affiliate, or other
person in accordance with the terms of this Agreement, any subsequent disclosure or use of such
Confidential Information by such employee, affiliate, or other person shall be deemed a disclosure or use
by Recipient and Recipient shall be responsible for such disclosure or use. The Recipient shall
immediately notify the Discloser upon the discovery of any loss or unauthorized disclosure or use of the
Confidential Information of the Discloser.
3. The restrictions on use and disclosure of Confidential Information shall not apply unless such
Confidential Information, when in tangible, electronic or viewable form is marked confidential or
proprietary by Discloser, or when disclosed only orally is both identified as confidential or proprietary at
the time of disclosure and summarized in a writing so marked and provided to Recipient within thirty (30)
days following the oral disclosure; except that any unmarked material and any verbally disclosed
information that Recipient knows or reasonably should know to contain Confidential Information of the
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Discloser, including but not limited to business or technical information not generally known to the public,
such as patents, copyrights, trademarks and trade secrets, as well as all written or oral pricing and
contract proposals exchanged between the Parties shall be subject to the use and disclosure restrictions
of this Agreement. Within the 30-day period referenced above, all Confidential Information communicated
only orally shall be subject to the use and disclosure restrictions of this Agreement.
4. The restrictions on the use or disclosure of Confidential Information shall not apply to any information:
a. Which is independently developed by the Recipient as evidenced by documentation in such
Party's possession; or
b. Which is lawfully received from another source free of restriction and without breach of this
Agreement by the Recipient; or
c. After it has become generally available to the public without breach of this Agreement by the
Recipient; or
d. Which at the time of disclosure to the Recipient was known to the Recipient free of restriction as
evidenced by documentation in such Party's possession; or
e. Which the Discloser agrees in writing is free of such restrictions.
5. All Confidential Information shall remain the exclusive property of the Discloser, and no license under
any intellectual property right is either granted or implied by this Agreement or the conveying of
Confidential Information to Recipient hereunder. Discloser makes no representations, warranties,
assurances, guarantees or inducements of any kind, and, in particular, with respect to the non-
infringement of any intellectual property rights, or other rights of third persons or of Discloser.
6. Neither this Agreement nor the disclosure or receipt of Confidential Information hereunder shall
constitute or imply any promise or intention by either Party to enter into any transaction or business
relationship, nor is it an inducement for either Party or its affiliated companies to spend funds or
resources or purchase or provide products or services, nor is it any commitment by either Party or its
affiliated companies with respect to the present or future marketing of any product or service. No such
agreement will be binding unless and until stated in a separate writing signed by authorized
representatives of both Parties.
7. Each Party agrees not to announce or disclose to any other person (other than persons described in
Section 1(iii), above) the Confidential Information or the nature of any discussions concerning the
Purpose without first securing the prior written approval of the other Party. All Confidential Information
furnished hereunder shall be returned or destroyed upon written request or upon Recipient’s
determination that it no longer has a need for such Confidential Information, except that Recipient’s legal
counsel may retain one copy in counsel’s files solely to provide a record of such Confidential Information
for archival purposes.
8. The restrictions on use and disclosure of Confidential Information disclosed hereunder shall survive
for a period of three (3) years from the date of last disclosure of any such Confidential Information (except
in the case of software, for an indefinite period). Either Party may terminate this Agreement upon thirty
(30) days advance written notice to the other.
9. All notices or communications required or permitted as a part of this Agreement shall be in writing
(unless another verifiable medium is expressly authorized) and shall be deemed delivered when:
A. actuallyreceived,
B. upon receipt by sender of a certified mail, return receipt signed by an employee or
agent of the Party,
C. upon receipt by sender of proof of email receipt, or
D. if not actually received, ten (10) days after deposit with the United States Postal
Service authorized mail center with proper postage (certified mail, return receipt
requested) affixed and addressed to the respective other party at the address set forth
in this Agreement or such other address as the Party may have designated by notice or
Agreement amendment to the other Party.
21
The consequences of failure to receive a notice due to improper notification by the intended Recipient of
a new address will be borne by the intended Recipient. The addresses of the Parties to this Agreement
are as follows:
<Vendor Name> City of Fort Collins
<Vendor Address Line 1> 215 N. Mason
<Vendor Address Line 2 PO Box 580
<Vendor Address Line 3> Fort Collins, CO 80521
Attention: Project Manager Attention: Purchasing Director
10. This Agreement shall not be construed to limit either Party's right to independently develop or acquire
products or services without use of the other Party's Confidential Information.
11. The restrictions on disclosure of Confidential Information under this Agreement shall not preclude
Recipient, on the advice of counsel, from complying with applicable law, regulation, other governmental
requirement or other demand under lawful process, including a discovery request in a civil litigation, if
Recipient first gives Discloser notice of the required disclosure and cooperates with Discloser, at
Discloser’s expense, in seeking reasonable protective arrangements. In no event shall Recipient be
required to take any action which, on the advice of Recipient’s counsel, could result in the imposition of
any sanctions or other penalties by a court or government body.
12. Neither Party has any obligation to disclose Confidential Information to the other. Either Party may, at
any time: (i) cease giving Confidential Information to the other Party without any liability, or (ii) request in
writing return of Confidential Information previously disclosed.
13. Recipient acknowledges that Confidential Information provided under this Agreement maybe subject
to U.S. export laws or regulations. Recipient shall not use, distribute, transfer or transmit Confidential
Information (even if incorporated into products, software or other information) except in compliance with
such laws and regulations. If requested, Recipient shall sign written assurances and other export-related
documents as may be required to comply with such laws or regulations.
14. Each Party agrees that all of its obligations undertaken herein as Recipient shall survive and continue
after any termination of this Agreement, subject to Section 8 above.
15. No amendment or modification of this Agreement shall be valid or binding on the Parties unless made
in writing and signed by duly authorized representatives of each Party.
16. Subject to the limitations set forth in this Agreement, this Agreement will inure to the benefit of and be
binding upon the Parties. This Agreement may not be assigned by one Party without the other Party's
prior written consent.
17. If any provision of this Agreement shall be held by a court of competent jurisdiction to be illegal,
invalid or unenforceable, the remaining provisions shall remain in full force and effect to the greatest
extent permitted by law.
18. No forbearance, failure or delay in exercising any right, power or privilege is waiver thereof, nor does
any single or partial exercise thereof preclude any other or future exercise thereof, or the exercise of any
other right, power or privilege. This Agreement is binding upon and inures to the benefit of the Parties
and their heirs, executors, legal and personal representatives, successors and assigns, as the case may
be.
19. This Agreement shall be governed by the laws of the State of Colorado, U.S.A., without regard to its
conflicts of law principles. Each Party acknowledges and agrees that a breach by it or one of its affiliates,
employees or representatives of any of the covenants set forth in this Agreement will cause irreparable
injury to the other Party and its business for which damages, even if available, will not constitute an
adequate remedy. Accordingly, each Party, for itself and its affiliates, employees and representatives,
agrees that the other Party, in addition to any other remedy available at law or in equity, shall be entitled
to the issuance of injunctive relief (including, without limitation, specific performance) by a court
of competent jurisdiction in order to enforce the covenants and agreements contained herein.
20. Any judicial proceeding brought by or against any of the Parties on any dispute arising out
of this Agreement or any matter related hereto shall be brought exclusively in the state district
court sitting in Larimer County, Colorado, and by execution and delivery of this Agreement,
each of the Parties accepts for itself the exclusive jurisdiction and venue of the aforesaid court
as trial courts. Each Party expressly waives any objection (including, without limitation,
objections based on forum non conveniens)whichany Party may have now or hereafter to the
laying of venue or to the jurisdiction of any such suit, action, or proceeding, and irrevocably
submits generally and unconditionally to the jurisdiction of any such court in any such suit,
action, or proceeding. Each Party agrees that its attorneys shall accept service of process.
21. This Agreement constitutes the entire understanding between the Parties as to the
treatment of Confidential Information disclosed for the Purpose and merges all prior discussion
between them relating thereto. Each Party has read this Agreement, understands it and
agrees to be bound by its terms and conditions. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken together shall
constitute one single agreement between the Parties. Signatures exchanged by facsimile or
other electronic means are effective for all purposes hereunder to the same extent as original
signatures.
INWITNESSWHEREOF,the Parties have executed this Agreement as of the date first set forth
above.
City of Fort Collins, Colorado
By: By:
(Typed or printed name) (Typed or printed name)
(Title) (Title)
22
CITY-INITIATED
PROPOSED CHARTER AMENDMENT NO. 1
Shall Article XII of the Charter of the City of Fort Collins, pertaining to municipal public
utilities, be amended to add a new section authorizing City Council, by ordinance and without a
vote of the electors, to authorize the City’s electric utility to acquire, construct, provide, fund and
contract for telecommunication facilities and services within and outside the City’s
territorial limits, whether directly or in whole or part through RQH RU PRUH third-party
providerV, to include, without limitation, the transmission of Internet data, voice and video,
and to authorize the Council, in exercising this authority, to: (1) issue revenue and refunding
securities and other debt obligations as authorized in the Charter, but in a cumulative total
principal amount not to exceed $150,000,0000; (2) set the rates, fees and charges for these
facilities and services subject to the same limitations in the Charter for setting the rates, fees
and charges for other City utilities; (3) go into executive session to consider matters
pertaining to issues of competition in providing these facilities and services to include,
without limitation, matters subject to negotiation, strategic planning, pricing, sales and
marketing, development phasing and any other matter allowed under Colorado law; (4)
establish a Council-appointed board or commission and delegate to it by ordinance, in
whole or part, the Council’s governing authority and powers granted under this new Charter
section, but not the power to issue securities; and (5) delegate to the City Manager by
ordinance, in whole or part, its authority to set the rates, fees and charges for
telecommunication facilities and services?
______Yes/For
______No/Against
FOR ILLUSTRATION AND DISCUSSION PURPOSES
Charter Article XII, Municipal Public Utilities
Section 7. Electric utility and telecommunication facilities and services.
(a) In addition to all the powers granted by this Charter to the Council to acquire, condemn,
establish, construct, own, lease, operate and maintain an electric utility to provide light, power
and other electrical facilities and services, the Council may, by ordinance and without a vote of
the electors, authorize the electric utility to acquire, construct, provide, fund and contract for
telecommunication facilities and services within and outside the City’s territorial limits, whether
directly or in whole or part through RQH RU PRUH third-party providerV, to include, without
limitation, telecommunication facilities and services providing for the transmission of Internet
data, voice and video.
(b) The Council, acting as itself or the board of the electric utility enterprise, shall have the
power to issue revenue and refunding securities and other debt obligations as authorized in
Sections 19.3 and 19.4 of Article V of this Charter to fund the provision of the
telecommunication facilities and services authorized in this Section. The cumulative total
principal amount of any such securities and other debt obligations issued shall not exceed one
hundred and fifty million dollars ($150,000,000), except that any refunding of such securities or
other debt obligations shall not be included in that cumulative total. The City’s payment of and
performance of covenants under the securities and other debt obligations issued under this
subsection (b) and any other contract obligations of the City relating to the provision of
telecommunication facilities and services under this Section, shall not be subject to annual
appropriation so long as annual appropriation is not required under Article X, Section 20 of the
Colorado Constitution.
(c) The Council shall set by ordinance the rates, fees and charges for furnishing the
telecommunication facilities and services authorized in this Section subject to the same
limitations in Section 6 of Article XII of this Charter for setting the rates, fees and charges for
other City utilities, except to the extent this authority is delegated by Council pursuant to
subsection (e) below. In setting such rates, fees and charges, the Council may also include
amounts payable to the City’s general fund for a franchise fee, a reasonable rate of return on any
contributions from the general fund to acquire or construct telecommunication facilities, and the
repayment of any loans from the general fund to the electric utility used to support the provision
of telecommunication facilities and services under this Section, to include the payment of a
reasonable rate of interest on any such loans.
(d) In addition to the authority to go into executive session as provided in Section 11 of Article II
of this Charter, the Council, and any board or commission established under subsection (e)
below, may go into executive session to consider matters pertaining to issues of competition in
providing the telecommunication facilities and services authorized in this Section, which shall
include, without limitation, matters subject to negotiation, strategic planning, pricing, sales and
marketing, development phasing and any other matter allowed under Colorado law.
(e) As authorized in Section 1 of Article IV of this Charter, the Council may, by ordinance,
establish a Council-appointed board or commission and delegate to it, in whole or part, the
FOR ILLUSTRATION AND DISCUSSION PURPOSES
Council’s governing authority and powers granted under this Section concerning the furnishing
of telecommunication facilities and services by the City’s electric utility, but not the power to
issue securities as provided in subsection (b) above which shall only be exercised by the Council
acting as itself or the board of the electric utility enterprise. The Council may also delegate by
ordinance to the City Manager, in whole or part, its authority in subsection (c) above to set the
rates, fees and charges for furnishing telecommunication facilities and services. Any Council
ordinance delegating this authority shall set forth the process to be used by the delegate for the
setting of these rates, fees and charges. In addition, the amount of the rates, fees and charges so
set by the delegate shall be determined under the same criteria the Council is authorized and
required to follow in subsection (c) above.
(f) For purposes of this Section, telecommunication facilities and services shall mean those
facilities used and services provided for the transmission, between or among points specified by
the user, of information of the user's choosing, without change in the form or content of the
information as sent and received.
FOR ILLUSTRATION AND DISCUSSION PURPOSES
Charter Article XII, Municipal Public Utilities
Section 7. Telecommunication facilities and services.
(a) In addition to all the powers granted by this Charter to the Council to acquire, condemn,
establish, construct, own, lease, operate and maintain an electric utility to provide light, power
and other electrical facilities and services, the Council may, by ordinance and without a vote of
the electors, authorize the electric utility to acquire, construct, provide, fund and contract for
telecommunication facilities and services within and outside the City’s territorial limits, whether
directly or in whole or part through RQH RU PRUH third-party providerV, to include, without
limitation, telecommunication facilities and services providing for the transmission of Internet
data, voice and video. Alternatively, the Council may create by ordinance and without a vote of
the electors a telecommunications utility to exercise these same powers to furnish
telecommunication facilities and services within and outside the City’s territorial limits. If
the Council creates a telecommunications utility, it may also establish that utility as an
enterprise of the City in the same manner, with the same powers and subject to the same
requirements and limitations established under Section 19.3(b) of Article V of this Charter
for the City’s other enterprises. The Council may also exercise with respect to the
telecommunications utility the same general authority and powers granted to Council in this
Charter with respect to the City’s other utilities.
(b) The Council, acting asitself,the board of the electric utility enterprise or as the board of the
telecommunications utility enterprise, shall have the power to issue revenue and
refunding securities and other debt obligations as authorized in Sections 19.3 and 19.4 of
Article V of this Charter to fund the provision of the telecommunication facilities and services
authorized in this Section. The Council shall also have the power to issue general
obligation securities as authorized in Section 19.2 of Article V of this Charter to
fund the provision of the telecommunication facilities and services authorized in this
Section. The cumulative total principal amount of any such securities and other debt
obligations issued shall not exceed one hundred and fifty million dollars ($150,000,000),
except that any refunding of such securities or other debt obligations shall not be included in
that cumulative total. The City’s payment of and performance of covenants under the
securities and other debt obligations issued under this subsection (b) and any other
contract obligations of the City relating to the provision of telecommunication facilities
and services under this Section, shall not be subject to annual appropriation so long as
annual appropriation is not required under Article X, Section 20 of the Colorado Constitution.
(c) The Council shall set by ordinance the rates, fees and charges for furnishing the
telecommunication facilities and services authorized in this Section subject to the
same limitations in Section 6 of Article XII of this Charter for setting the rates, fees and
charges for other City utilities, except to the extent this authority is delegated by Council
pursuant to subsection (e) below. In setting such rates, fees and charges, the Council may
also include amounts payable to the City’s general fund for a franchise fee, a reasonable rate of
return on any contributions from the general fund to acquire or construct telecommunication
facilities, and the repayment of any loans from the general fund to the electric utility used to
support the provision of telecommunication facilities and services under this Section, to
include the payment of a reasonable rate of interest on any such loans..
FOR ILLUSTRATION AND DISCUSSION PURPOSES
(d) In addition to the authority to go into executive session as provided in Section 11 of Article II
of this Charter, the Council, and any board or commission established under subsection (e)
below, may go into executive session to consider matters pertaining to issues of competition in
providing the telecommunication facilities and services authorized in this Section, which shall
include, without limitation, matters subject to negotiation, strategic planning, pricing, sales and
marketing, development phasing and any other matter allowed under Colorado law.
(e) As authorized in Section 1 of Article IV of this Charter, the Council may, by ordinance,
establish a Council-appointed board or commission and delegate to it, in whole or part, the
Council’s governing authority and powers granted under this Section concerning the furnishing
of telecommunication facilities and services by the City’s electric utility or telecommunications
utility, but not the power to issue securities as provided in subsection (b) above which shall only
be exercised by the Council acting as itself or as the board of the electric utility enterprise or as
the board of the telecommunications utility enterprise. The Council may also delegate by
ordinance to the City Manager, in whole or part, its authority in subsection (c) above to set the
rates, fees and charges for furnishing telecommunication facilities and services. Any Council
ordinance delegating this authority shall set forth the process to be used by the delegate for the
setting of these rates, fees and charges. In addition, the amount of the rates, fees and charges so
set by the delegate shall be determined under the same criteria the Council is authorized and
required to follow in subsection (c) above.
(f) For purposes of this Section, telecommunication facilities and services shall mean those
facilities used and services provided for the transmission, between or among points specified
by the user, of information of the user's choosing, without change in the form or content of the
information as sent and received.
FOR ILLUSTRATION AND DISCUSSION PURPOSES
1
ATTACHMENT 3
2
Contents
I. Executive Summary ............................................................................................................................ 5
II. Mission ................................................................................................................................................. 6
Status Quo ................................................................................................................................................. 6
Why Fiber-to-the-Premise (“FTTP”)? Why Now? ................................................................................... 6
City of Fort Collins Retail Broadband Solution ........................................................................................ 7
History of Investigation ............................................................................................................................ 8
Platte River Power Authority .................................................................................................................. 12
III. Broadband Market Profile ........................................................................................................... 14
Residential............................................................................................................................................... 14
Commercial ............................................................................................................................................. 14
City of Fort Collins ................................................................................................................................. 15
IV. Fort Collins Customer Profile ...................................................................................................... 17
Market Segmentation .............................................................................................................................. 17
Residential Market .................................................................................................................................. 18
Online Residential Broadband Survey .................................................................................................... 20
Top Attributes Relative to Importance Comparable Results .................................................................. 20
Low Income ............................................................................................................................................ 20
Small- to Mid-Size Business ................................................................................................................... 21
Large Business / Institution .................................................................................................................... 24
Subscribership (“Take Rate”) ................................................................................................................. 25
V. Competitive Environment ................................................................................................................ 28
Incumbents .............................................................................................................................................. 28
Competitive Response ............................................................................................................................ 30
Municipal Retail Implications ................................................................................................................. 31
VI. Operating Plan .............................................................................................................................. 32
Retail Model Summary ........................................................................................................................... 32
Critical Operational Success Factors ...................................................................................................... 32
Capital Requirement ............................................................................................................................... 33
Passing Cost ............................................................................................................................................ 33
Drop Cost ................................................................................................................................................ 35
Pricing Assumptions ............................................................................................................................... 36
3
Marketing Plan ........................................................................................................................................ 38
Objectives – Marketing Plan ................................................................................................................... 38
Budget ..................................................................................................................................................... 39
Promotion & Advertising ........................................................................................................................ 39
Customer Service Plan ............................................................................................................................ 39
Customer Service Strategy ...................................................................................................................... 39
Customer Service Planning ..................................................................................................................... 40
Customer Service Staff ........................................................................................................................... 40
Personnel Requirements .......................................................................................................................... 41
Facilities .................................................................................................................................................. 42
Milestone Timeline ................................................................................................................................. 43
VII. Network Architecture ................................................................................................................... 44
Network Technologies Overview ........................................................................................................... 44
Fiber Technologies .................................................................................................................................. 46
Copper Technologies .............................................................................................................................. 47
Wireless Technologies ............................................................................................................................ 48
Implications............................................................................................................................................. 49
City of Fort Collins Assets ...................................................................................................................... 50
GPON in Model ...................................................................................................................................... 51
GPON and Active Ethernet Summary .................................................................................................... 52
GPON – Low Cost and Flexible ............................................................................................................. 52
Active Ethernet – Futureproof ................................................................................................................ 52
VIII. Financial Model ............................................................................................................................. 53
Base Case Assumptions .......................................................................................................................... 53
Year 0 – 5 Construction Phase ................................................................................................................ 54
Funding ................................................................................................................................................... 54
Year 1: ..................................................................................................................................................... 55
Year 2 - 5: ............................................................................................................................................... 56
Revenue .................................................................................................................................................. 56
Year 5+ Operations Phase ....................................................................................................................... 57
Net Cash .................................................................................................................................................. 58
Financial Statements – Profit and Loss ................................................................................................... 59
4
Sensitivity ............................................................................................................................................... 62
Scenarios ................................................................................................................................................. 63
Mitigation and Risk ................................................................................................................................. 63
IX. Opportunities and Threats ........................................................................................................... 65
Opportunities: ......................................................................................................................................... 65
Threats: ................................................................................................................................................... 65
X. Conclusion ......................................................................................................................................... 67
XI. Appendix ........................................................................................................................................ 68
XI.A. Peer Cities ..................................................................................................................................... 68
5
I. Executive Summary
This document offers a high-level business plan for initiating and operating the City of Fort
Collins’ Retail fiber-to-the-premise (FTTP) broadband network. After extensive research and
due diligence, municipal deployment of a FTTP network is a viable alternative to produce
meaningful sustainable benefits for the City of Fort Collins. Fiber’s a proven technology with a
stable history, capable of meeting current performance standards. It is the most promising
alternative to meet future needs.
The business plan (Plan) addresses the broadband status quo in the City of Fort Collins, market
profile and opportunity, operating plan, proposed network architecture and financial
requirements of the retail model. In addition, the competitive environment will be investigated,
possible operating scenarios examined, and frequently asked questions answered.
The Plan was written with data provided by Uptown Services in the 2016 Financial Feasibility
Analysis and with data available to staff at the date of publication and may not reflect current
conditions. The Plan will be updated as new information becomes available.
6
II. Mission
Status Quo
The City of Fort Collins began exploring the benefits and need for a high speed fiber network in
2010 when Google announced the launch of the “Think big with a gig: Our experimental fiber
network” competition. The City was among the estimated 1,100 communities that applied. After
Google announced Kansas City as their first Google Fiber community, the City, along with
Colorado State University (CSU) joined an effort called GigU. Thirteen communities and their
land-grant universities partnered to explore the benefits to the University and City of Fort Collins
by creating a future-proof “Connected City.”
Why Fiber-to-the-Premise (“FTTP”)? Why Now?
The term “future proofing” is used to describe a city that is connected to the internet for
commerce and quality of life services. Fort Collins is home to CSU and an outstanding public
school system that uses the internet for world-class research and business. Fort Collins has a
tech-savvy culture and a strong economic base with diverse employment opportunities that
could benefit from enhanced broadband services. High speed broadband is the nervous system
of innovation, entrepreneurship, education and quality of life. The ability to connect quickly and
reliably (both upload and download) has proven to be a differentiator.
For the next 30-50 years, fiber is the anticipated required infrastructure. With upgrades to the
electronics, a fiber network can handle significantly greater speeds in the future. In contrast,
existing coax and copper cable systems are at the end of their technological life and will not
support speeds that will be needed throughout the next 20 years. Conversation with the two
major incumbents providing internet service in the community indicated both believed their
existing speeds were adequate to meet existing consumer needs and their business plan was to
upgrade the system speed as the consumer needed it. Neither would commit to when a full fiber
network system to all premises may be implemented.
Questions frequently arise as to why the City would enter a market that traditionally has been
dominated by private companies. According to the Federal Communications Commission
(FCC) the real underlying cause of slow, expensive internet in the U.S. is the lack of competition
among providers. New broadband entrants into the market have a substantial impact on price
reductions, increased customer service and accelerated infrastructure upgrades. Incumbents
typically try to maximize use of the existing infrastructure, such as copper, wireless or a hybrid
approach. Non-fiber infrastructure can create dependability concerns due to the life and
reliability of copper. Fiber, which the City’s exploring in its broadband plan, is not susceptible to
weather or electromagnetic interferences and can have a lifespan of 25–40 years or beyond.
Currently, wireless technology is a complement to wired connections, not a substitute.
7
The City realized a fiber-connected city created advantages over a disconnected city. With the
growing importance of high speed internet within the economy and citizen’s daily lives, a plan
for securing gigabit-speed internet across the City’s growth management area (GMA) is crucial.
It was also apparent that the existing networks within the City’s GMA would require significant
technology upgrades before they were able to offer reliable gigabit speeds to the general public
at a reasonable price. It would seem a municipal network was the obvious option. However,
Senate Bill 05-152 (SB152) prohibited the City from being engaged in providing internet
services; that is until 2015. In November 2015, 83 percent of Fort Collins voters chose to
overturn SB152, thus removing the legal barriers to the City of Fort Collins from providing high
speed internet.
Staff created this high-level business plan to document the assumptions, data, estimates,
challenges and details associated with creating a municipal retail fiber-to-the-premise (FTTP)
network that would offer broadband service to the Fort Collins GMA.
City of Fort Collins Retail Broadband Solution
During the Budgeting for Outcomes (BFO) community outreach in 2014, the community
prioritized and identified a need to address the lack of reliable, universal and affordable
broadband services. The City of Fort Collins addressed the broadband situation by identifying
the following strategic objective in the 2015/2016 Strategic Plan.
“Strategic Objective 3.9 – Encourage the development of reliable high speed internet services
throughout the community.”
The overall objective is to bring reliable, high speed internet to the city of Fort Collins, while
making an informed decision through evaluation of risk and opportunities. The FCC formally
defines broadband as internet download speed of 25 megabits per second (Mbps) and upload
of 3Mbps or faster. However, a popular benchmark of high-speed broadband is commonly
known as gigabit speed (Gbps), and is seen in many cities across the country including
Longmont, CO.
One possible option for accomplishing Strategic Objective 3.9 is the City of Fort Collins
Municipal Retail FTTP Broadband Network in which the City will design, build, own, operate and
market internet services to all premises within the City’s GMA. Initial build-out of the network
would be within existing city limits and service would be added to the GMA as those areas were
annexed into the City. In summary, the City would:
• Design a fiber grid network to ensure infrastructure is available on a community-wide
basis
• Borrow between $130M and $150M to fund the network construction and systems
implementation to all businesses and residences
8
• Design a fiber grid system to ensure infrastructure is available on a community wide
basis
• Manage construction of the fiber network build, provide quality assurance and
comprehensive testing to ensure a high quality network
• Design and install fiber drops to each premise when a customer orders internet service
from the City
• Provide internet services to all premises requesting service
• Lease Dark Fiber as requested by businesses
• Develop sales and marketing programs to effectively compete in this competitive market
• Develop appropriate back-office systems required to support customer service and
maintain and monitor the network
• Target Residential Pricing of $50/month for 50Mbps service, and $70/month for 1Gbps
while also offering an “Affordable Internet” tier program
Fort Collins plans symmetrical (same speed for both downloads and uploads) speed offerings of
both 50Mbps and 1Gbps residential offerings. Symmetrical service would also be an option for
commercial subscribers.
Additional benefits sought by the City include:
• Competitive pricing
• Universal coverage across the GMA
• Underground service for improved reliability
• Timely implementation to providing services within a reasonable timeframe
History of Investigation
The City held discussions with each of the Fort Collins major incumbents. Each described their
strategic commitments and timing to upgrade their existing systems to a high speed fiber-based
system. While the incumbents have plans to upgrade their systems over time, no specifics or
promises were provided, such as:
1) What percentage of customers will have FTTP connectivity by year-end 2017/2018?
2) When they will have a network that is fully fiber-based across the entire growth
management area?
3) How they will help the City ensure that all neighborhoods benefit from connectivity?
Staff explored a number of solutions in addition to the retail model to achieve the City’s Strategic
Objective 3.9 and developed the following four alternatives:
9
A. Do Nothing – Rely on the current incumbents to upgrade their systems and provide
improved speed and reliability per their capital improvement plans
B. 3rd Party or Partnership – Develop a partnership with an existing internet service
provider that leverages their expertise and experience combined with the City’s brand
and reputation to develop and deliver high speed internet within the community
C. Wholesale Model – where the City builds out a fiber network and attracts other service
providers to market and operate the system
D. Retail Model – where the City enters the business of building out, operating and
providing internet and other services across a City-owned fiber infrastructure
Extensive community engagement was conducted in 2016 to determine citizen preference
among the four options. The graphs below summarize the citizen “in-person” results, Local
Legislative Affairs Committee preference and input from the online survey.
10
NOTE: At the time of the outreach, the third-party alternative was called “franchise.” Colorado statute does not allow telecommunication franchises and therefore is
now referred to as third-party.
0%
20%
40%
60%
80%
Absolutely Not Supportive Not Supportive Cautiously Supportive Somewhat Supportive Very, Very Supportive
Face-to-Face Results
(without Local Legislative Affairs Committee)
Do Nothing Franchise Wholesale Retail
0%
10%
20%
30%
40%
50%
60%
70%
Absolutely Not Supportive Not Supportive Cautiously Supportive Somewhat Supportive Very, Very Supportive
Local Legislative Affairs Committee Results
Do Nothing Franchise Wholesale Retail
0%
10%
20%
30%
40%
50%
60%
70%
Absolutely Not Supportive Not Supportive Cautiously Supportive Somewhat Supportive Very, Very Supportive
Online Results
Do Nothing Franchise Wholesale Retail
11
As part of the investigation, staff has had phone discussions and visited with several
communities that have launched a broadband effort. In addition, a consultant, Magellan, was
engaged in late 2015 to provide case study analysis of the various business models
communities have used. Attachment 1 provides the detail of Magellan’s analysis. The City of
Fort Collins also evaluated how 25 peer communities are working to stay connected. Twenty out
of 25 peer cities have state legislation that restricts municipalities’ ability to operate in the
telecommunications industry. Appendix XI.A summarizes how Fort Collins peer cities are
approaching broadband.
In summary, the “Do Nothing” alternative did not achieve Strategic Objective 3.9. The
Wholesale model requires the City to make a significant investment in building out the fiber
network (approximately $90M) and the success of that network and the City’s ability to repay the
debt for the build-out is dependent on the success of these external service providers. The risks
identified with the Wholesale model are similar to what has occurred in Utah and Tacoma
Washington. Staff determined neither of these alternatives met the objectives of the project.
From 2016 through early 2017, staff explored both the 3rd Party/Partnership model and the
Retail model. This business plan is specific to the exploration of a City owned and operated
FTTP internet service business.
The City hired Uptown Services, consultants who have evaluated broadband service offerings in
more than 40 different communities, to support a feasibility evaluation of both retail and
wholesale models. Working with staff, Uptown conducted market surveys, evaluated and
estimated construction costs, estimated market take rates (the market share the City would
have after five years) and developed a financial model for a full build-out of a fiber network in
Fort Collins. The resulting business plan relies heavily on the work of Uptown Services.
12
Platte River Power Authority
Platte River Power Authority (PRPA) maintains the local fiber loops for the Cities of Fort Collins,
Loveland and the Town of Estes Park. The backbone fiber ring began in 1998 as an electric
substation communication upgrade. It replaced unreliable radio and telephone line connectivity
for an important supervisory control and data acquisition (SCADA) network. A quality SCADA
system provides utilities (both power and water) with valuable knowledge and capabilities that
are key to running a reliable and safe business. PRPA and the City of Fort Collins partnered to
connect all of the substations in the community with a 144-fiber backbone cable (12 buffer
tubes). PRPA, needing only one buffer tube (12 fibers), offered buffer tubes to City Traffic,
Utilities and IT departments. The remaining fibers were presented as leasable to public and
private local institutions.
PRPA’s role continues to include:
Managing all fiber splices on the substation backbone
Providing location services for the substation backbone
Actively leasing dark fiber not used by the host municipality to public and private lessees
(potential additional revenue for the new system)
Provide solution design services to lessees
Performing ongoing maintenance, troubleshooting, and customer support for lessees
Maintaining fiber documentation and fiber management database
Implementing capital improvement
Administering billing and collections of fiber lease revenue and returning the collected
revenue to the municipalities
13
The current agreement between the City of Fort Collins and PRPA expires on Dec. 15, 2018.
Currently, the City utilizes 36 of the 144 fiber strands for existing City use (fire, police, IT, Utility,
Traffic, etc.). Of the 144 strands, only 25 are not being utilized. It is also estimated that the City
receives $270k in revenue annually from PRPA due to dark fiber leasing agreements.
Given the limited number of unused strands and the expected future need to utilize the existing
PRPA fiber infrastructure to support municipal operations, very limited excess capacity has
been identified that could be used for the retail model. As a result, the infrastructure needed to
support the retail model will require new fiber installation, and will not be able to leverage the
existing PRPA fiber ring.
14
III. Broadband Market Profile
Residential
Currently, the majority of computers and applications do not require gig speed to operate
effectively. Studies indicate speeds of 75Mbps will largely handle the average consumers’
requirement. However, the City’s goal is to “future-proof” with fiber infrastructure for three
reasons:
1) As more and more devices are used within a single household, the simultaneous use will
begin to exceed the current speed offerings.
2) As speed becomes more readily available, new applications will be developed that
require a higher speed.
3) With the growing use of cloud services, a more symmetrical service will be required.
Residential broadband subscribers are utilizing more online applications that require more
bandwidth, quality and reliability out of internet connections. The impact of simultaneous
applications and devices accessing a single home broadband connection creates a situation
where most residential broadband connections are unable to handle the amount of bandwidth
needed to support all applications simultaneously. In addition, the myriad of cloud services is
driving the need for more symmetrical broadband services, as real-time applications require
additional bandwidth, in terms of both download and upload speed. Many times, these
applications synchronize in real time, meaning that they are always consuming bandwidth at a
constant rate rather than only when the user is actively engaged through their computers,
tablets and smartphones. As more of these applications are deployed, broadband connections
will need to accommodate the increased bandwidth load.
The proliferation of devices, commonly referred to as the Internet of Things (IOT), is also driving
the need for more bandwidth. As more devices in homes, businesses and public places all
access existing broadband connections, these demands also extend to many devices inside the
home that are now connecting to the internet using residential broadband connections. Many
video/audio systems, thermostats, irrigation and security systems are now connected to the
internet, consuming more home broadband bandwidth. The increase in the number of devices
using internet-based applications continues to drive additional broadband demand in the home.
Commercial
Accessible, affordable and reliable broadband services are a key productivity and efficiency
driver for businesses of varying sizes. In many cases, bandwidth consumption outpaces the
broadband speeds local businesses are able to purchase. Upgrading is often times not an
option due to the prices businesses are able to afford and service availability, as well as other
IT-related factors. When local broadband services cannot “keep up” with business needs,
businesses lose productivity and efficiency, which affects their bottom line and makes them less
competitive with regions that have more affordable broadband services.
15
Taken in aggregate, this lack of online access will eventually result in a less competitive
business market, from an economic perspective, as growth from the digital economy will be
realized by other communities. Solid economic studies have not been completed that support
this presumption; however, more and more businesses acknowledge that reliable, high speed
internet is a requirement as they look at relocation opportunities. Communities also risk
retention issues as businesses that are not able to gain efficiencies with their existing
broadband services will, in many cases, move operations to communities that have more
availability of these services.
Broadband is a fundamental utility asset that businesses require, as they rely on broadband to
maintain connectedness to the electronic world. The majority of these types of
businesses rely on online services to maintain their daily operations. Through promotion of a
community’s leading-edge broadband services, current businesses can be assured that they
can remain in the region and have robust access to the rest of the digital world. Accessible and
affordable high speed broadband has also gone beyond being a differentiator to being a key
part of the “minimum ante” for attracting and retaining desirable businesses and facilities. Cities
that realize this take steps to ensure their environments are favorable and the “cost of doing
business” is not increased due to expensive broadband services.
City of Fort Collins
Fort Collins is nestled against the foothills of the Rocky Mountains and alongside the banks of
the Cache La Poudre River. With an estimated population of 167,500, Fort Collins is among the
nation’s fastest growing metropolitan areas. The City includes many assets and amenities that
provide a competitive advantage including: CSU, abundant natural resources and agricultural
land, a highly educated and creative workforce, a historic downtown, and many miles of trails,
parks and bike paths. Fort Collins is known as an innovative community and has one of the
highest rates of patents per capita in the world with a major research institution – CSU – a
cluster of federal laboratories and such high-tech companies as Hewlett-Packard, AMD, Intel
and Broadcom.
DEMOGRAPHIC FACTS FORT COLLINS COLORADO UNITED STATES
Est. Population, 2017 167,500 5,540,500 323,127,513*
Persons under 5 years old* 5.7% 6.2% 6.2%
Persons under 18 years old* 19.9% 23% 22.9%
Persons 65 years and over* 8.8% 13% 14.9%
Female persons* 50.1% 49.7% 50.8%
Employmentꜛ 74,498 2,181,455 121,079,879
Median Household Income* $55,647 $60,629 $53,889
Median Age* 29.3 34.3 37.7
Approx. % of Pop. w/ completion of 4+ years of college
education*
52.5% 38.1% 29.8%
White person* 89% 87.5% 77.1%
Persons of Hispanic or Latino origin 10.1% 21.3% 17.6%
*Data provided by ACS 2011-2015 ꜛSource: Colorado State Demography Office
16
Factors that influence local internet adoption include cost, availability and a city’s demographics,
including income levels. Brookings Institute noted in 2015 that 92.1percent of households
earning $75,000 or more annually had a broadband subscription. Using this benchmark to
evaluate the Fort Collins market indicates that roughly 36.3 percent of Fort Collins residents
earn $75,000 or more per year.
Surveys and market studies performed by Uptown Services LLC, consultants engaged by the
City of Fort Collins, found the following issues prevalent:
The two incumbents have the vast majority of market share for both Internet and voice
services in Fort Collins.
Satisfaction for Internet and voice service benchmarks low; video is average.
Top residential market needs are: lower prices, increased Internet speed, and improved
reliability.
Top small- to medium-size business market needs are: lower prices and carrier-grade
reliability.
Residential market purchase intent is very high and exceeds Longmont survey metrics.
Small- to medium-size business market needs are being met, but price levels are high
up to 200Mbps.
Strong provider preference for the City within the residential market.
Small- to medium-size business market is open to considering the City FTTP network as
a provider option.
The project appeal and purchase intent is strongest among younger households.
17
IV. Fort Collins Customer Profile
Market Segmentation
Uptown Services LLC were engaged to investigate the Fort Collins market and produce a
market demand study based on survey results and expertise.
Uptown segments and methodologies:
18
Residential Market
According to Governing.com’s “America’s Most Connected Cities,” 91.4% of Fort Collins
residents have at least one wired connection.
Top 20 cities with the Highest Internet Subscribership Rates per Governing.com 2013:
A statistically valid phone residential market demand survey conducted by Uptown Services in
March 2016 asked questions around the internet, voice and video services as part of the overall
inputs for the financial feasibility analysis. The study focused on high speed internet service, but
the appeal of bundling services at a minimal cost was also investigated. The study confirmed
that almost all Fort Collins households use the internet. Of Fort Collins households surveyed, 99
percent use the internet at home. Of these connected homes, cable modem and digital
subscriber lines (DSL) represent the vast majority of the market share at 94 percent.
Additionally, the study indicated that internet usage is prevalent across all income and age
groups.
The survey also touched on customer service satisfaction levels, which plays a role in the
market demand for alternative broadband services. Respondents were asked to rank customer
satisfaction of various services (cable television, satellite television, non-pay television –
antenna and basic channels, DSL, cable modem, telephone and electric utility) on a scale of 1-
10 (with 10 being “totally satisfied” and 1 being “not at all satisfied”). The average customer
19
satisfaction ranged from a high for electric utility at a mean rating of 8.7, to 6.8 for DSL and 6.6
for cable modem. Sixty-four percent of the respondents rated the City’s Utility brand a 9 or 10
rating while other incumbent internet services had significantly lower ratings. Lower prices,
increased internet speed, and reliability dominate the wish list of service improvements
respondents identified for broadband. Branding and bundling were of secondary importance.
Additionally, 81 percent of respondents acknowledged the importance of having low cost, high
speed internet.
In addition to questions about current broadband services, market share and customer service
satisfaction, the broadband market demand survey asked respondents about their interest and
purchase intent (willingness to switch) for broadband services if offered by an alternative fiber
network provider. Assuming the competition at a $70 per month price and a City-owned network
at $50 per month price, seventy percent of respondents would definitely or probably switch to a
City-owned fiber network for internet services. Furthermore, if respondents answered they
would ‘definitely’ or ‘probably’ switch to the fiber network for internet services, they were asked
the reason for the switch. The top three reasons given by respondents for a switch were: need
for higher capacity, lower prices and the City as a preferred provider. If both the City and
competitive offering were priced at $70 per month, only 45 percent of respondents indicated
they would definitely or probably switch to the City-owned network.
81%
14%
2% 2% 1%
Very Important Somewhat Important Neither Somewhat
Unimportant
Very Unimportant
Importance of Having Low Cost High-Speed Internet
Fort Collins
20
Online Residential Broadband Survey
Due to wide-spread community interest, staff made an edited version of the residential market
demand phone survey available online to anyone who wanted to participate. This was not
intended to be statistically valid, but rather to allow more residents to engage in the
conversation. More than 1,800 responses were received and the results were consistent with
the original, statistically valid, residential phone survey; the exception being that the online
questionnaire saw a higher response from younger demographics.
Top Attributes Relative to Importance Comparable Results
Online Questionnaire Participants Statistically Valid Phone Survey Participants
Speed Reliability
Price Price
Reliability Speed
Customer Service Customer Service
Low Income
In October 2015, 33 percent (or ~8,744) of Poudre School District (PSD) students participated in
the free or reduced lunch program. This program provides subsidized meals for those
households that meet the 185 percent of poverty level qualification. The data provided by PSD
was then compared to the census data for Fort Collins to verify that 5.4 percent of all
households are eligible for the free meals participation program. The low income, affordable tier
program will be available to those households at the 1.3 income: poverty ratio to match the free
meal participation requirements, and calculates to be approximately 3,332 households.
The “Affordable Internet” tier program is not been fully defined. Staff anticipates this will occur
during the initial operational planning stage if the retail model is pursued.
1%
79%
18%
10% 2%
43% 44%
3%
I Would Switch to Comcast I Would Switch to Ft Collins I Would Retain My Current
Service
Don't Know
“If these services were available to your home, and offer the same speed, which
of the following statements best describes your likelihood to switch?”
Comcast $70/City $50
Both $70
21
Small- to Mid-Size Business
As of 2016, the City of Fort Collins has approximately 8,000 small- to mid-size businesses
(SMB). Eighty-eight percent of all Fort Collins businesses are defined as small businesses (less
than 50 employees), which is similar to the national average. Nationally, SMBs are responsible
for 64 percent of new jobs and 50 percent of non-farm gross domestic product (GDP).
Uptown prepared a separate quantitative, statistically valid phone survey that was deployed to
the small- to mid-size business segment in March 2016. The survey found that Comcast and
CenturyLink are the only two Internet Service Providers (ISPs) with significant SMB market
share in Fort Collins (about 96 percent of respondents). Two-thirds of SMB respondents in Fort
Collins are under contract for internet and voice services. Additionally, SMB respondents had
similar responses to the residential respondents in regard to customer satisfaction by service
and customer needs. Reliability, increased speed and lower internet prices dominated the wish
list for service improvements for SMBs. One item to note is that SMBs put a larger emphasis on
the need for improved reliability (48 percent of SMBs identified this on their wish list), due to
reliance on technology and the internet for business operations (merchant service transactions,
ecommerce, cloud-based storage, etc.).
22
54%
42%
1% 0%
2%
Comcast CenturyLink Rise Broadband FRII Other
Internet Access Provider for SMB Market Share
14%
26%
6%
2%
8% 8%
2%
34%
10M 20M 30M 40M 50M 100M >100M Don't Know
SMB Subscribed Download Speed
23
66%
6%
2%
26%
SMB Incidence of Provider Contracts
Both Internet and Voice Internet Only Voice Only No Contract
10%
10%
48%
34%
32%
Customer Service
Nothing
Reliability
Increased Internet Speed
Lower Prices
SMB Wish List for Improved Broadband Services
24
Large Business / Institution
The objective of the large business / institution qualitative survey was to identify the current
capacity needs, future capacity needs, unmet needs and level of support for a fiber broadband
network. Those interviewed could be major commercial account customers, and/or influencers
in the community. A total of 24 interviews were conducted and the responses aggregated for
confidentiality.
Findings from large business/institution qualitative surveys:
• Fiber is widely available and there is high incidence of dedicated access via fiber
• The survey found that due to multiple incumbent providers competing in the large
business/institution segment
• Advance data needs are being met with dedicated connections for the
business/institutions sole usage
• Most firms currently have sufficient bandwidth, but the City FTTP network would be
considered as an option for redundancy and potential cost savings
6%
24%
36%
2%
4%
0%
2% 2%
24%
11%
15%
45%
4%
0% 0% 0%
3%
23%
CenturyLink Comcast The City FRII PRPA TDS Telecom Rise
Broadband
A new
provider
Don't Know
High Speed Internet Provider Preference
SMB Residential
25
Subscribership (“Take Rate”)
Uptown consultants utilized a conservative research technique from the Packaged Goods sector
to estimate potential subscribership rate, or take rate. This technique has been utilized for more
than 30 years. It was developed as firms realized research respondents, for various reasons,
overstate purchase intentions during research as compared to the eventual penetration of a
product that was commercially launched. One measure of success for municipal broadband
projects is by its “take rate,” defined as the number actual number of subscribers divided by the
total potential subscribers. The consultants estimated the take rate for City-provided internet
service in Fort Collins at 38.8 percent for residential and 45 percent for small business. With the
potential launch of DOCSIS3.1 by Comcast, a competing internet service that provides 1Gbps
down and 30Mbps up, Uptown revised the City’s residential take rate to 30.2 percent.
During the recent development of the retail model business plan, staff re-evaluated the pricing
model based on industry standards and long-term sustainability. Additionally, during this time,
Comcast announced the deployment of DOCSIS 3.1 to the Colorado market. This technology
utilizes Comcast’s existing coaxial cables and can provide 1 Gbps download and 35 Mbps
upload speeds.
Due to these changes (listed below), Uptown Services recommended re-surveying the
community to confirm the take rate:
1. City of Fort Collins revised the Tier 1 (50 Mbps) internet price from $40 to $50 per
month
2. City of Fort Collins revised the Tier 2 (1 Gbps) internet price from $50 to $70 per
month
3. Comcast’s DOCSIS 3.1 pricing is $159.95 per month without a contract, and $110
per month with a one-year contract.
19
17
1
15
24
17
19
1
3
19
5
8
3
1
0% 20% 40% 60% 80% 100%
Will Consider the City?
Under Contract?
Have Unmet Needs?
Have Redundancy?
Dedicated Connection?
Have Fiber?
Fiber Available?
Large Institutional Partner Needs
Yes
No
26
4. Comcast is testing a $70 per month promotional offer in Longmont, where NextLight
1 Gbps is offered.
Based on the survey responses, Uptown Services has estimated the City’s retail model take rate to be
28.2 percent.
The following data shows that the estimated take rate is comparable to similar municipal
benchmarks at the 5-year milestone. Five years signifies the completion of the construction
period.
Estimated take rates based on the statistically valid phone surveys conducted March 2016, April
2016 and June 2017:
Pre-DOCSIS 3.1
Post-DOCSIS 3.1
Estimates
Post-DOCSIS 3.1
Announcement*
Residential Internet 38.8% 30.2% 28.2%
SMB Internet 45%
Residential Voice 28.6% 8.4%
SMB Voice 41%
*assuming $70 gig pricing for incumbents and City retail
0%
10%
20%
30%
40%
50%
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108
Month
Internet Penetration
(By Month Since Launch)
Sallisaw, OK Morristown, TN Pulaski, TN
Wilson, NC Tullahoma, TN Murray, KY
27
Residential subscribed premises would reach approximately 18,000 in year 5 and grow with the
population at 0.4 percent thereafter. Commercial subscribed premises would reach 3700
premises in year 5 and grow at 1.5 percent while staying at a constant take rate of 45 percent.
Voice services take rate would erode throughout time from a high of 8.4 percent in year 4, to 4.7
percent in year 15, as this technology reaches end-of-life and citizens transition from land lines
to cellular service.
28
V. Competitive Environment
Incumbents
The Fort Collins market is dominated by two major incumbents, Comcast and Century Link.
Each of these incumbents operated within the City for several decades and provides all three
services generally included in a bundled offering – internet, phone and video content.
Century LinkTM (CL) has a significant fiber presence within the community to support their
existing network with plans to extend further into new construction neighborhoods at some time
in the future. The majority of new residential construction supported by CL is FTTP. CL stated
the current average consumer does not need 1 Gbps service. CL shared data with City staff
that indicates the maximum consumer need, accounting for multiple devices, is estimated at 75
Mbps with today’s applications. CL’s not committed to when, or if, they will serve all Fort Collins
premises with a fiber connection. CL also shared they face a challenge of meeting their ROI
requirements if they were to build out to the entire City with a fiber network.
Comcast also has an extensive fiber presence within the community that primarily extends to
the node within a neighborhood. Newly constructed neighborhoods are served by a combination
of fiber and/or coax. Comcast also has not committed to a timeline for servicing all Fort Collins
households with fiber.
57%
37%
4%
2%
Current Internet Market Share
(Households)
Comcast CenturyLink Satellite Other
29
During the community engagement visits, many communities communicated significant
challenges from their local incumbents, which illustrate the highly competitive market the City
would enter with a retail model offering. The City’s anticipated 28.2 percent take rate would
largely come from the market share of the two incumbents.
INCUMBENT RESIDENTIAL INTERNET PRICING
Download Upload Price Technology
Comcast
10M
25M
75M
150M*
250M*
2M
5M
5M
10M
25M
$49.95
$59.95
$74.95
$89.95
$149.95
Cable
Modem
(DOCSIS
3.0)
2G*
(limited availability within 1/3
mile of fiber network)
2G
MRC: $299.95
NRC: $1,000
(2 Year Term
Contract w/ Penalty)
Fiber
1G 1G
Monthly: $140
3 Year Term: $70
Cable
Modem
(DOCSIS
3.1)
CenturyLink
1.5M
7M
12M
20M
40M*
896k
896k
896k
896k
5M
$44.00
$49.00
$54.00
$64.00
$74.00
DSL
30
Competitive Response
Both incumbents have extensive resources, marketing teams and advertising budgets that can
create a significant competitive issue for a retail model offering by the City. Comcast is a
corporation that had $8B of after-tax profits in 2016, and CL is in the process of acquiring Level3
for approximately $34B. In addition, each incumbent also has legislative lobbyists that can
influence future legislation and could impair the City’s ability to fund and launch a retail model.
Wilson, NC spent approximately two years with legal and legislative hurdles before being able to
launch their internet service. UTOPIA, a consortium of sixteen towns in Utah, started out as a
retail model before legislation changed, which prevented municipalities from providing retail
service. The network was in construction and had to switch to a wholesale or open access
model. Various factors influenced the lack of success of UTOPIA, but they were ultimately
unable to attract sufficient service providers to make the network economically viable. iProvo,
Provo, UT’s municipal network also faced the same challenge as UTOPIA sold a $40M network
to Google for $1, and UTOPIA is in conversation with a third party who is asking each premise
within the service area pay an $18 per month utility fee to support the debt service and network
operations. This scenario is intended to illustrate the potential risks and influence large
incumbents can have within a local market.
Comcast recently announced the DOCSIS 3.1 technology roll out that utilizes their existing
coaxial network infrastructure. DOCSIS 3.1 offers 1 Gbps download speeds and 35 Mbps
upload speeds. The retail price of Comcast’s 1Gbps service with no contract would be $159.95
per month. A promotional price of $109.99 per month with a one-year agreement will be offered
in Fort Collins and Larimer County. The technology upgrade does require customers to perform
a cable modem and router replacement, and a firmware upgrade. Comcast believes this new
technology will meet the near-term needs of the community, and with future upgrades the
existing copper cable is capable of multi-gigabit speeds.
5
6
7
8
9
Cable Satellite TV DSL Cable Modem Telephone Utility
Satisfaction Rating by Service/Service Provider
(Mean Rating on a 1 to 10 Scale)
31
Municipal Retail Implications
Recently, the City Manager, Deputy City Manager and Chief Financial Officer visited several
municipal-run broadband providers. The communities visited included: Wilson, NC;
Chattanooga, TN; Cedar Falls, IA and Longmont, CO. The site visits allowed the attendees to
openly discuss the challenges and opportunities that a municipal-owned retail ISP can have on
the local community. Particular emphasis was placed on the governance of their municipal-
owned broadband.
Cedar Falls, IA Wilson, NC Chattanooga,
TN
Start Date 1995/2013 2008 2013
Market Share 85% 40% 55%
Price – 50/100 Mbps $58/mth $35/mth $60/mth
Price – 1G $117/mth $100/mth $70/Mth
Households Served 12,000 8,300 84,000
1G Customers 36 100 5,000
Governance Board of
Trustees
Council
Self-Executing
Memo
Board of
Trustees
L&P CEO
decision
Additional lessons learned from the site visits include:
• Broadband is complex and very different from Light & Power – business mindset,
market, etc.
• Broadband is a part of the community brand and sense of place
• Broadband creates economic advantage over those without connectivity
• Each of the communities would do it again
The recent market demand study conducted by Uptown Services indicates that given a choice,
the majority of respondents prefer to receive high-speed internet from the City (see graph in
IV.A.3). In addition, 78 percent of those surveyed ranked Fort Collins Utilities a 9 or 10 out of 10
in terms of satisfaction. The citizens of Fort Collins have trust and brand recognition in the City
organization. There’s a strong preference for the City within the mass market, both residential
and SMBs.
32
VI. Operating Plan
Retail Model Summary
The retail model assumes the City builds out a fiber network across the entire city limits and
ultimately across the entire GMA. The City also operates the network, provides internet and
possibly offers other services to subscribers. Marketing, customer acquisition, repair and
maintenance to the network, customer service representatives inside of call centers, and
administrative and management oversight functions will also need to be created and managed
by the City.
The City needs to issue bonds in the range of $130M to $150M to support the construction and
infrastructure needed to provide these services. Critical success factors within the financial
model include: 1) cost of network build, 2) take rate of the services from Fort Collins premises
and 3) the price for the service. Critical operational success factors include: 1) successfully
operating within a competitive environment vs. a traditional monopolistic utility environment, 2)
gaining expertise and experience within a fast-changing technology business and 3)
establishing appropriate governance and oversight structures that allow the broadband business
to operate in a competitive market.
Critical Operational Success Factors
The City is focused on service. That will be a strong asset within a broadband launch. Staff’s
commitment to serving the community and reputation for providing outstanding customer
service will be a considerable asset. A shift from an order-taking mindset, current utility
operations don’t require marketing and selling as they are the only source for citizens to acquire
these services, to customer acquisition through marketing and selling will be required. Agility,
nimbleness, market analysis, and closing-the-sale are essential attributes.
While the City has experience installing fiber in the ground and utilizing that fiber to monitor and
maintain various systems around the city, operating and marketing a network providing retail
service in competition with large corporations will require a different expertise and focus from
management and staff. Technology will shift, consumer preferences will change, and the
organization will need to be adaptable and responsive to these changes.
A governance structure different from the current Utility Enterprise governance will need to be
established; one that provides the ability to have private discussion with City Council on matters
of strategy, pricing, implementation, service plan changes, etc. All communities visited stressed
the need for a governance model that is different from the traditional municipal utility given the
competitive nature of the broadband market.
Operations management will be required to make timely business decisions. In order for a retail
business to succeed, operational decisions must be made as needed to compete in a time-
sensitive, competitive environment. These decisions may have significant material, financial,
33
operational, or personnel impact. Higher level discussions that are less time-sensitive and more
focused on overall strategy, vision, or mission can be driven by a council or a board of directors.
Capital Requirement
Capital requirements will be in the range of $130M-$150M depending on the final architecture
and subscriber adoption. Capital expenses include: network construction, network start-up
costs, issuance fees, capitalized bond interest, debt service, working capital, early installations,
etc. The estimated range of investment accommodates contingencies which could include
possible construction cost overruns, higher than anticipated demand, market competition
factors, or other unforeseen cost implications.
The largest cost component of the capital requirement will be the network construction, currently
estimated at more than $80M. Network construction amount estimates rest largely on the
“passing cost” (explained below). The final passing cost used in the retail model includes a
contingency to assist in managing total required capital.
Other significant network start-up related expenses of approximately $30M include: facility
equipment and systems, vehicles, engineering design, working capital, and electronic
equipment within the network.
Passing Cost
Fort Collins will require a total of more than 800 miles of fiber installed to reach the
approximately 62,000 premises within the GMA. “Passing Cost” is a key variable in modeling
the cost of a network and describes the cost of installing fiber within the City streets to pass
near each premise.
A key characteristic of Fort Collins that increases the passing cost is the fact that all fiber will
need to be installed underground. Ninety-nine percent of all Fort Collins utilities are
Capital Requirements Amount
Network Construction $80M
Electronics, Drop & Installation $18M
Facility, Systems, Vehicles, Start up $8M
Bond Issuance Fees, capitalized interest, Miscellaneous $12M
Engineering, Design, Inspection $4M
Subtotal $121M
Working Capital $9M
Contingency $0-$20M
Total $130-150M
34
underground and, per City Code, all new installations are required to be underground as well.
Compared to aerial network installations, this dramatically increases the cost of installation but
would increase reliability and reduce maintenance costs overall.
To estimate the cost of installing fiber throughout the Fort Collins network, sample
neighborhoods were analyzed. Density, described as number of premises passed per mile, is a
key driving variable determining the cost of network installation. Initially, seven sample design
representative neighborhoods were analyzed (listed below). The “passing per mile” metric was
calculated along with material and labor costs to arrive at a “Total Per Passing” cost for each
neighborhood. The neighborhood was then given a weight that describes the percentage of
Fort Collins GMA that particular neighborhood represented. Multi-Development Units (MDU),
such as apartment complexes, were analyzed separately due to their unique characteristics.
MDUs were estimated at 50 percent of the average cost of a single-family home installation.
The final weighted average cost per passing for Fort Collins was estimated at $855.
Due to the varying nature of Fort Collins neighborhoods, the uncertainty of conduit availability,
and potential issues with underground installation, a 15 percent contingency factor was added.
The final modeled passing cost equated to $984/premise.
NEIGHBORHOOD SAMPLE DESIGN
Sample
Design Area
UG
Miles
Passing
s
Passings
per Mile Weight
Materials
per
Passing
Labor
per
Passing
Total per
Passing
Quail Hollow 3.2 243 75 30.1% $140 $980 $1,120
English Ranch 2.5 243 96 22.6% $132 $781 $913
Alta Vista 0.7 63 95 6.4% $128 $792 $920
Old Town 2.2 235 98 5.7% $126 $699 $825
Hearthfire 2.6 174 66 2.1% $165 $1,097 $1,262
Taft Canyon 3.8 235 62 1.8% $170 $1,187 $1,356
Willow Brook 0.6 81 143 0.0% $98 $530 $628
MDUs* 0.0 0 0 31.3% $73 $424 $497
Weighted
Average / Total
15.6 1,274 82 100% $116 $739 $855
15%
Contingency
$984
35
Outside Plant
Costs
Weighted
Average
Per
Passing
Materials $116
Labor $739
Total $855
Contingency
@ 15%*
$128
Total $984
Drop Cost
Included in the total capital requirement is the “drop cost.” Passing a premise does not connect
the premise to the network or enable internet access; it simply means the fiber is in close
proximity to the premise. The fiber connection must still go through the “drop” phase before a
premise is actually connected to the network. The “drop cost” is the expense incurred to connect
the fiber in the street to the premise.
There are two components to the drop cost: pre-install and premise installation. Pre-install
includes trenching and installing the fiber underground on the premise property. Premise
installation costs primarily consists of the equipment (ONT, power cable, connectors, etc.)
needed at the premise to connect the fiber.
Total cost of a drop to a premise will average approximately $591 per premise with the highest
cost variable being the contract labor component. During the five years of construction, contract
labor is used to avoid the need to hire full-time employees on a long-term basis. Contract labor
is needed temporarily during construction to subsidize employee labor capacity to complete pre-
installs in a timely manner, and occasionally needed for premise installs during high activity
periods.
Drop Components Average Cost
Contract Labor $295.79
ONT Expenditures $172.57
Fiber cable, UPS, Power $123.42
36
Total $591.78
Pricing Assumptions
City retail residential pricing has been determined to be $70/month for gig service, $50/month
for 50Mbps service, and $25/mo for voice (phone) service.
City Retail Model Residential Pricing
Affordable Internet TBD
50 Mbps Symmetrical $50/month
1 Gbps Symmetrical $70/month
Voice $25/month
This pricing compares favorably to other municipal offerings around the country, as well as
incumbent offerings, and accomplishes the additional benefit sought by the City, namely
competitive pricing.
Comparative Municipal Offerings around the Country
Area 30 Mbps 50 Mbps 60 Mbps 100 Mbps 1 Gbps
RS Fiber - Minnesota
$50
$70 $130
Arrowhead Electric - MN $60 $70
$100
Reedsburg, WI
$45 $75
Sandy, Oregon
$60
Sebewaing, MI $35 $55
$105 $160
Chatanooga, TN
$58 $70
Lafayette, LA
$53 $63 $110
Longmont, CO $40
$50
Cedar Rapids, IA
$46 $105
Co-Mo Connect - MO
$100
Ozarks Electric - AR
$50 $80
Average $45 $58 $53 $67 $94
Commercial service will have a full range of possibilities that includes various speeds and
symmetrical options. Residential service is symmetrical by default. The range of the
commercial data offering would be:
Standard Internet Access
o Shared capacity connection over GPON
o No contract requirement and no Service Level Agreement (SLA) guarantees
o Can upgrade to symmetrical bandwidth and add premium BGP Routing (some
tiers)
Dedicated Internet Access
o Dedicated capacity via Active E connection (same ONT)
37
o Requires dedicated fiber strand; practical option for pure commercial service
areas
o Contract agreement with SLA and term requirement
High Capacity Direct Fiber Access
o Multiple connection options:
Direct routed connection
Customer CPE connection (either non-protected media converter or
protected)
o Protected connection is optional
o Contract agreement with SLA and term requirement
o Resale rights may be included
Point-to-Point (Transport Circuit): Dedicated pathway of defined capacity without access
MAN: Customized access and transport solution for multi-site business or institution
City Commercial
Download/Upload
City Commercial Price
25 Mbps/5 Mbps
Add Symmetrical
$59.95/month
+ $10
50 Mbps/10 Mbps
Add Symmetrical
$69.95/month
+ $30
100 Mbps/20 Mbps
Add Symmetrical
$89.95/month
+ $50
1 Gbps/500 Mbps
Add Symmetrical
$599.95/month
$200
Given the wide range of commercial possibilities, the practicality of modeling each option is not
feasible and produces diminishing returns with false precision. The retail model therefore
focuses on the three lowest material revenue streams shown above and accounts for the
majority of commercial revenue streams.
City Commercial
Retail Model
City Commercial Price
25Mbps / 5Mbps $59.95/month
50Mbps / 10Mbps $69.95/month
100Mbps / 20Mbps $89.95/month
High capacity options refer to dedicated bandwidth. This type of installation requires a custom
quote for both the recurring and non-recurring fees ($4,500/month for transport and access on
average) and term contract (typically 3 years). Commercial custom install fee to cover unique
costs per individual installation. Unlike the standard internet service offerings, the high capacity
installs should be reviewed on a case-by-case basis to establish pricing.
38
Marketing Plan
Objectives – Marketing Plan
The objectives of the marketing and customer service strategy are to secure and maintain a
minimum of 30 percent market share of all premises passed by installing one or more services
per premise. The long-term goal will be to secure and maintain a 45 percent to 50 percent
market share. Three distinct principles guide the product design, promotion, delivery and
support:
Provide excellent service with high quality technology
Educate customers on how an FTTP product improves their quality of life
Capitalize on the strengths and stability of City of Fort Collins brand and high quality
customer service
The survey completed by Uptown highlighted that Fort Collins Utilities has the highest customer
service satisfaction ratings among service providers. A cornerstone to the marketing and
customer service strategy is positioning the image of Fort Collins Utilities as stable, reliable and
efficient.
An equally important point to be communicated in the marketing message and reinforced by
customer service is the strength of the fiber technology platform. It offers customers increased
bandwidth, content and speed, along with more options for interactive services. Fiber has no
bandwidth limitation. The fiber network architecture will provide symmetric bandwidth or equal
speed for information uploads and downloads. That message will be translated by educating
customers about the ways this technology will improve their daily lives. Additionally, fiber can be
a platform to other technologies that could create additional opportunities for the City to provide
additional services such as wireless, Smart Cities capabilities, etc.
6.7
7.7
5.6
6.8 6.6
7.5
8.7
0.0
2.0
4.0
6.0
8.0
10.0
Cable TV Satellite TV Non-Pay TV DSL Cable Modem Telephone Utility
Satisfaction Rating by Service/Service Provider
(Mean Rating on a 1-10 Scale)
39
Budget
Marketing budget (not including Marketing Coordinator) in year 1 is $150,000 or one half of a full
year’s budget due to operations still being in startup mode without a full-year of activity. The
budget in year 2-5 budget is $300,000/annually. Year 6+ with on-going operations has a budget
of 1 percent of revenue, which equates to an average of approximately $250,000 per year.
Promotion & Advertising
Brand Positioning: Fort Collins Utilities has built a solid reputation for customer service.
Additionally, creating excitement as one of the first FTTP communities reinforces that the City of
Fort Collins is an innovative and progressive community. For the FTTP project, it will be key to
capitalize on this image and reinforce favorable brand reputation by extending its performance
in offering broadband services.
Awareness Advertising: The City will implement local ads and promotions. These include print
advertising, social media, sponsorships and event marketing (booths at local events).
Direct Marketing and Promotion: The direct marketing program will benefit from a community-
level scale of the Utilities brand. These tactics involve targeted marketing as the network is
rolled out within specific areas with specific messages and promotional offers. The objective is
to get the recipient to respond with information or purchase inquiry (either online or over the
phone). The most important direct marketing tactic is direct mail and door hangers, as well as
other viable tactics such as bill inserts and marketing events.
Customer Service Plan
Customer Service Strategy
A key component to gaining customers, and more importantly, retaining customers is the
service and support they receive. The overriding goals of customer service are to resolve
customer issues with the initial call and remain accessible to customers at all times. An
important marketing message can focus on the legacy of excellent customer service already
provided by the City of Fort Collins.
In an effort to achieve those goals, customers will enjoy multiple points of entry to the customer
service department. Representatives will be available to handle both call-in and walk-in inquires.
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Additionally, the Utilities website will offer options to review product and service availability,
order services, view billing statements and process bill payments.
Option 1: Customer service associates will be managed and integrated as part of the existing
Utilities Customer Connection Department (“Customer Connections”).
Option 2: Outsource first tier customer call center to a third party provider that runs 24-hours a
day. A local presence will be a priority.
Customer Service Planning
The customer service teams’ primary focus is customer satisfaction, to maintain customer trust
and loyalty, to sell the customer products based on their needs and interests, and to ensure
each customer values our products and services. Important performance metrics and indicators
include:
Availability – monthly availability of 99.925 percent
Mean Time to Repair – monthly average not to exceed two hours Monday - Friday
Customer Call Wait Time –will not exceed a monthly average of two minutes
Customer Service Staff
Customer Connections success relies on the ability to recruit, hire, train, motivate and retain a
team of talented and knowledgeable professionals. Commitment to provide superior customer
service is implicit in all job descriptions and it is important that all customer service
representatives (CSR) share our commitment to make each customer experience value added
and build a lasting customer relationship.
The team of training CSRs will respond to incoming customer calls, handle customer contact in
retail locations, up-sell customers (when additional products are available), and make outbound
calls to customers for follow-up. They will consider every call taken as a sales opportunity to
respond to customer orders to:
Process new sales and up-sell orders (when additional products are available)
Process transfer service and move orders
Process downgrade and disconnect order
Process equipment-related orders
Categorize and process order types
Ask open-ended questions to determine which product offerings best suit the customer’s
household needs
Uptown estimated that Fort Collins Utilities would need to add four CSRs in year two of the
network development and an additional two full-time equivalents (FTE) by year five.
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Additionally, Customer Connections will need to hire two FTEs dedicated to Commercial
Accounts.
Personnel Requirements
Position Title
Base
Salary Year 1 Year 2 Year 3 Year 4 Year 5
General Manager (GM) $135,000 1 1 1 1 1
Data Technician $105,000 1 2 2 2 2
Commercial Account
Representative $80,000 1 2 2 2 2
Sales Engineer $80,000 1 1 1 1 1
Field Operations Supervisor $80,000
1 1 1
Marketing Coordinator $75,000 0.5 1 1 1 1
MDU Account Manager $75,000 1 2 2 2 2
Contingency $70,000 5 5 5 5 5
Maintenance Technicians $65,000
1 1 2 2
Technical Service Representatives
(TSR) $60,000
4 4 5 6
Service Technicians $60,000
1 3 4 4
Installation Technicians $55,000
3 7 6 5
Customer Service Representatives
(CSR) $50,000
4 4 5 6
Total
10.5 27 34 37 38
The model assumes the base salary and headcount reported above plus 30 percent for benefits
and 2.5 percent annual increase. Management including the General Manager, Data
Technician, Commercial Account Representative, Sales Engineer, Marketing Coordinator and
Multi-dwelling Unit (MDU) Account Manager will be hired in year one with growths through year
three to reach steady state. Front-line hiring will start in year two. Headcount will vary during
the five year build out to align with start-up activity with the following numbers representing
steady state. Five contingency headcount have been added to the model to account for
unforeseen issues or productivity concerns.
6 Customer Service Representatives - inbound/office sales, order entry and first tier
support
6 Technical Service Representatives - second tier customer support, dispatch and
service provisioning
CSR/TSR staffed at 1 FTE per 2,000 accounts growing to 4,000 by Year 5, but with a
minimum of 3 FTE for CSR/TSR to ensure phone coverage.
5 Install Technicians
42
o Installs are two-phases, with a pre-install followed by a separate premise install.
All pre-installs are completed by a contractor at a fixed rate ($200) for Years 1-5,
and then insourced. Premise installs are completed by internal FTE, except in
Year 4 (25%) and Year 5 (50%) by a contractor at a fixed rate ($250) to maintain
Install Tech headcount at long-term levels. Each Install Tech can complete three
installs per day, growing to four per day by Year 5.
2 Maintenance Technicians – maintain fiber system from backbone to network access
point, 1 per 1,000 plant miles of fiber
4 Service Technicians – fix subscriber problems
o Service call volume equals 50 percent of all subscribers/year dropping to 25
percent by Year 5. Each Service Tech can complete four per day growing to 6
per day by Year 5
Compensation is based on the City’s wage scale with 30% benefits assumed and 2.5 percent
annual salary increases. Annual salary increases may need to be evaluated due to industry
standards.
Facilities
A Broadband Office and Shop Facility will be required with approximately 17,000 square feet of
both office and shop space. Financial assumptions assume a facility would be built on existing
City-owned land and 2017 cost estimates are $5.6M. Leased space will be evaluated during
detailed business planning. From the start of design, the time to build appropriate facilities is
estimated to take 19 months, and will require interim facilities for operations during the first 1.5
years.
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Milestone Timeline
44
VII. Network Architecture
Network Technologies Overview
Cisco's latest Virtual Networking Index shows the average North American home has seven
Internet-capable devices and by the year 2020, that number will swell more than 12 devices per
person in a household. This has significant implications for our broadband networks. While our
appetite for bandwidth is increasing, new and evolving applications will stimulate this demand
even more. A few examples are:
4K and 8K High Definition televisions
Automated homes, where consumers control appliances through phones or tablets
Fully-integrated security systems, where consumers can protect their homes through
sensors and video
Smart thermostats to reduce energy usage
eHealth applications and other video or data intensive services
Smart City and other Internet of Things (IOT) applications
The demand for widespread deployments of high speed broadband is accelerating. Existing
service providers are at a crossroad on how to best meet this demand while leveraging existing
investments and maximizing limited capital resources.
Existing service providers face different situations based on the type network they manage
today and on whether they serve urban areas or more rural communities. Given fiber optic cable
has virtually unlimited capacity, it forms the backbone of the Internet, cable TV networks,
telephone (including cellular) networks, private business networks and even data center
networks. As customers, we expect wireless access be available for convenience. Wireless
access is primarily available via Wi-Fi and supplemented with cellular data plans.
The communications community generally agrees that fiber will meet the world’s needs today
and into the foreseeable future. The only debates involve the speed of the transition. The
reason for this is simple: FTTP offers far more bandwidth, reliability, flexibility and security and a
longer economic life than alternative technologies, even though its deployment price is
comparable. It’s less expensive to operate and maintain than copper.
Networks are composed of two parts – the transport medium and the technology that provides
services or bandwidth. Copper, fiber and wireless are examples of transport mediums. Various
technologies are used to provide services over these medium. Networks today are composed of
at least two transport mediums and many use all three. The technology employed for services is
discussed later.
Transport medium configurations:
1) Fiber to the Node/Curb (FTTN) – used by Telephone Companies (telcos)
a) Fiber is deployed to the neighborhood outdoor telco cabinets housing VDSL2 Terminals
b) Leverages copper telephone twisted pair lines using VDSL2 and ,in the future, G.fast
45
2) Hybrid Fiber Coax (HFC) – Used by cable companies
a) Fiber is deployed to a node in a neighborhood
b) Coax (copper) cable is used from the node to the home or business.
c) The number of amplifiers and other devices required is dependent on distance and
condition of the copper
d) Uses Data Over Cable Service Interface Specification, or DOCSIS
e) Bandwidth is shared at the node
3) Fiber to the Premise (FTTP) – Used by all types of service providers, mostly in greenfield
applications. Fiber is deployed all the way to the premise
4) Wireless - almost a customer expectation
a) Uses radio frequencies to carry data
b) Limited by distance, electrical and radio interference
c) There is an inverse relationship between the radio frequency used and the ability to
penetrate physical objects (including leaves and moisture in the air) and the amount of
data-carrying capacity
Fiber optic cable is made up of strands of hair-thin glass that carry information by transmitting
pulses of light. The pulses are turned on and off very quickly. A single fiber can carry multiple
streams of information at the same time over different wavelengths, or colors of light. Fiber has
many advantages over copper wire or coaxial cable. It can transmit high bandwidth over long
distances, it is rugged and weather proof, resistant to electrical and radio interference, and
requires lower operating expenditures.
Copper cable, by contrast, carries low voltage electrical signals. Distance and state of the
physical plant greatly impact copper’s ability to transmit data. It can support high bandwidth for
short distances. The longer a signal travels on copper, the lower the bandwidth. Distance isn’t
the only constraint for copper. Copper plants are subject to interference from electrical and
radio sources. This interference can quickly degrade the Signal to Noise ratio. These
limitations as well as the active nature require a very skilled technical staff and power to run the
devices through the power distribution. These are just a few of the factors that drive a higher
operating expense as compared to fiber.
The above is also true for wireless networks. Tweaking more bandwidth from either wireless or
copper plants becomes increasingly difficult and expensive as time goes on. This isn’t true of
optical fiber, whose capacity is effectively unlimited.
As mentioned above, there are different technologies used to deliver services to bandwidth over
the communications networks.
46
Fiber Technologies
Fiber technologies used for a Fiber-to-the-Premise (FTTP) deployment are lumped into one of
two categories: Active or Passive. The primary differences are whether active devices are used
in the distribution network and effective distance to a customer. Active systems have powered
devices in the field and can drive a signal for longer distances. The power requirements and
operating expense is less for an active system than a copper plant. Active systems are used
primarily in more dense applications such as corporate networks, campus environments or data
centers.
Most operators are deploying passive systems known as Passive Optical Networks (PON). A
PON system has an Optical Line Terminal (OLT) as an originating point, usually in a central
office. The terminating point is an Optical Network Terminal (ONT), which is located at the
customers premise. Passive splitters, based on customer density, are placed in the network
between the OTL and ONT. The passive splitter is usually a 1:32 split and reduces fiber
required in the networks.
Most of us have heard of the Verizon FIOS and Google Fiber networks, but all of the large
telcos and cable operators have deployed PON networks for some of their footprint. Cable
operators are leaning toward an Ethernet PON (EPON) system as it is has a migration path that
uses the existing DOCSIS element management systems. Gigabit PON (GPON) is being
deployed by most other providers. Currently GPON provides higher bandwidth options but
EPON is moving quickly toward higher bandwidth options.
GPON is an ITU standard (G.984) that delivers 2.5 gigabits downstream and 1.25 gigabits
upstream using multiple Layer 2 networks giving the ability to separately transport services.
Standard distance is 20 km with an option to use long range optics extending the reach to 40 or
60 km, and can use a split ratio of up to 128 customers. Most deployments use a 1:32
customer split. Lower splits can increase range.
NG-PON2 is ITU standard and the next evolutionary phase of GPON. It provides for 10 gigabits
symmetrical with fixed optics and allows for 40 gigabits using tunable optics. It is currently
being deployed primarily with fixed optics. Most equipment sold today is available with an option
to upgrade to the new standard.
EPON is an IEEE standard (IEEE802.ah) that delivers 1 gigabit symmetrical bandwidth using a
single Layer 2 network to transport all services. An amendment, IEEE 802.3av, provides for 10
gigabits down and 1 gigabit up. Most deployments use a 1:32 split. No upper range is defined.
47
Copper Technologies
As mentioned earlier, copper and wireless transport medium are subject to many of the same
limitations: distance, electric and radio interface, signal cross talk, etc. As such, the technical
solutions leverage many of the same features including vectoring, Forward Error Correction,
Signal to Noise improvements, etc. They are pulling out every trick in the book to wring out as
much bandwidth as possible from these networks. This requires the physical plants be well
maintained and continually swept, and requires a very accomplished technical staff to run, thus
driving higher operating cost.
Cable plants or HFC plants use DOCSIS for providing bandwidth or services. The most widely
deployed generation of DOCSIS technology, known as 3.0, is capable of providing a gigabit per
second (Gbps) of broadband capacity downstream and 100 Megabit per second (Mbps)
upstream. The newest generation of DOCSIS broadband, known as 3.1, provides a near-term
path toward continued improvement of cable broadband performance, with network capacity up
to 10 gigabits per second downstream and 1 Gbps upstream. These are asymmetrical products
and share this bandwidth across a node. Bandwidth available is determined by number of free
channels available for bonding. Each channel can provide roughly 38 Mbps of throughput for
DOCSIS 3.0 and between 50 Mbps and 63 Mbps for DOCSIS 3.1.
CableLabs is working on a technology that will enable fully symmetrical speeds, bringing
upstream capacity on par with the 10 gigabit per second downstream capacity of DOCSIS 3.1
broadband. This is known as Full Duplex DOCSIS 3.1.
One of the main changes to DOCSIS 3.1 is orthogonal frequency domain multiplexing (OFDM).
OFDM makes quantum leaps in the amount of data capacity and speed available – sometimes
as much as 50 percent more capacity over the same spectrum. Where DOCSIS 3.0 was able to
achieve 6.3 max bits/Hz, DOCSIS 3.1 is able to achieve 10.5 max bit/Hz at 4096 QAM. In a
more typical situation where multiple QAMs are being used at the same time, DOCSIS 3.1 is still
able to achieve 8.5 bits/Hz, making it 35 percent more efficient.
Most cable plants run over 870 MHz of available spectrum. This is broken down into 6 MHz
channels. Several of these are reserved leaving about 132 useable channels. These channels
provide both video and data. Different channels must be dedicated for upstream and
downstream bandwidth. This is one reason for the asymmetrical nature of DOCSIS. Due to new
video compression technologies, you can get about three High Definition video channels per 6
MHz channel. Given cable companies are deploying hundreds of channels, you can see why
they are struggling to provide the high speeds customer are expecting. With DOCSIS 3.0, 1 gig
of bandwidth uses roughly 27 channels of capacity for the downstream path alone. That is why
most systems provide speeds significantly less than 1 Gbps. DOCSIS 3.1 provides for 35 to 50
percent higher data throughput per channel, but even this isn’t enough to meet future needs.
Therefore, DOCSIS 3.1 also does away with the 6 MHz channel size and allows for sub-carrier
48
bonding to more efficiently use of the available spectrum. But in order to maximize bandwidth
throughput, the coax loops must be shortened, with amplifiers and other devices removed. This
helps mitigate two of the limitations of a copper plant: distance and interference.
For fiber-to-the-node (FTTN) deployments, the most prevalent technology is a version of DSL –
VDSL2. This is ITU standard G.933.2. As this is a copper technology, it is subject to the same
issues as coax and wireless. The bandwidth provided is very limited to between 50 and 100
Mbps. To maximize the bandwidth available, the distance sweet spot is between 500 and 1000
feet.
A new standard, G.fast, under ideal conditions and with vectoring (crosstalk cancellation) and
bonding (simultaneous use of more than one pair of copper wires), can provide 500 Mbps
symmetrical bandwidth up to 300 feet from a fiber node. G.fast may prove to be an excellent
solution for retrofitting apartment buildings with fiber to the basement (as long as those buildings
already have good internal copper wiring), but it requires bringing fiber very close to customer
premises and is still limited in comparison with true fiber to the home. Using the 2.4 spectrum
provides lower bandwidth but a greater distance. Conversely the 5GHz spectrum provides
higher data throughput with limited distances.
Wireless Technologies
The two most widely deployed wireless technologies are Wi-Fi and 4G cellular. Wi-Fi is an IEEE
standard- 802.11. The most current version is 802.11a wave 2. It uses both the 2.4 and 5 GHz
unlicensed spectrum. This is the technology that most of us have in our home and are very
familiar with the user experience obstacles such as: distances are very limited, cross talk is
rampant and internal walls and other obstructions are a real problem. The primary methodology
to drive higher bandwidth is through the utilization of more antennas and bonding the antennas.
Unfortunately, while routers are making good progress on this front, very few end devices (PCs,
laptops, tablets, etc.) are leveraging the multiple antenna bond feature.
The cellular industry has deployed its fourth generation network known as 4G or LTE. The
original specification was for 100 Mbps, with the latest versions supporting up to 1Gbps shared
across the entire cell site which is the potential bandwidth shared by all users connected to a
cellular antenna. Therefore, a wireless user might get high speeds for a moment or two, if no
one else is around. Cell sites vary in size generally covering around five or six miles.
Unfortunately, bandwidth drops off very quickly. To illustrate, if you move a quarter of the way
from the cell tower to the edge of the cell service area, you can see a 50 percent drop off in
bandwidth. Most cell sites utilize fiber backhaul with a target of 300 Mbps of backhaul capacity.
Large companies and the media are already hyping “5G,” despite the fact that we are years
away from a 5G standard and nobody actually knows how fast 5G will be. Today, 5G is primarily
a marketing term, and often a misleading one. When the average person hears “5G,” they most
likely assume it means that gigabit cell phones are around the corner. “5G” today is being used
49
to describe not only the upcoming 5G standard but also for small cell 4G technology being used
to fill gaps or relieve congestion, in existing 4G cell sites. It also often confused with wireless
connections using millimeter wave spectrum for point-to-point connections.
5G technology will utilize spectrum bands that are higher in frequency than has been typical for
mobile services to date. Higher-range frequencies offer the potential of greater bandwidth for
improved network capacity, but they do so while limiting effective distance. These
characteristics lead to a fiber deep, small cell approach, as the most likely deployment for 5G.
These 5G sites will cover hundreds of feet, instead of miles, as in today’s 4G deployments. This
makes for an excellent urban deployment, but in rural areas where customer concentration is
less, this can be an issue. Thus it is highly unlikely 5G will replace 4G for coverage “out of
town,” and thus will not be a solution for the “digital divide” affecting those areas.
To be clear, in the short run, there may be situations in which the use of 5G connections with
fixed wireless backhaul may enable service to certain locations. These locations may be so
remote that they are unlikely to ever receive wireline service, and therefore 5G may make
sense.
When compared to a 5G network that can deliver significant bandwidth using very high, very
short-haul frequencies, FTTP is often less expensive and will have lower operational costs. This
is particularly true when one considers how much fiber deployment will be needed to enable 5G.
Implications
All broadband providers today, wired and wireless alike, realize the way to increase broadband
capability is to increase the amount of fiber in their network. Landline providers are replacing
their copper cable with fiber, cable operators are replacing their coax cable with fiber, and even
wireless providers are actually replacing their wireless networks with fiber by placing their
towers, or small cells, closer to the customer.
On the other hand, point-to-point wireless links, typically using so-called “millimeter wave”
antennas, can be very useful to extend a fiber network to serve a specific neighborhood or
building. This type of wireless is not cellular as each user gets much of the total bandwidth
potential of the transmission link. Once bandwidth needs require an upgrade to fiber, the
wireless link can often remain in place as a backup.
Wireless services are important public amenities, but they are not substitutes or replacements
for FTTP. Rather, they complement and extend existing fixed-fiber networks. Many wireless
access points and cell sites are already fiber-connected, and the majority of them will be soon.
Wireless service can thus be considered an application on a fiber network rather than a
separate type of network.
50
For a cost comparison consider a standard city block. A rule of thumb for the cost of a fiber drop
is typically $5 per foot (for buried or aerial). If you use an average fiber drop length in a town
environment of 160 feet, the cost is typically $800 per customer. Therefore, the cost to install
fiber drops to all 8-12 customers on a city block would range from $6,000 to $10,000. A small
tower and 5G cell site would cost $30,000-$50,000. The cell site would also require commercial
power and batteries if the wireless network were expected to work during a power outage. For
5G wireless, it appears that the customer premise electronics are at least as much as the FTTP
electronics, and likely more expensive. The drop cost for the FTTP network is likely 25 percent
of the cost of the 5G wireless drop. Also, considering that the FTTP network can deliver more
than 100 times the speed and capacity of the 5G wireless network, it appears that the FTTP is a
considerably better value if fixed broadband is the goal with the assumptions above.
As mentioned earlier, the communications community generally agrees that fiber will meet the
world’s needs today and into the foreseeable future with the only debate involving the speed of
the transition.
City of Fort Collins Assets
Fiber Inventory Assessment
Fiber Network Characteristics
o 144 fiber cable routed throughout the City in conduit
o 112 fibers in use; 32 fibers “available”
Network Users
o City Departments – Traffic, IT, Utilities (electric and water)
o Third-party governmental entities – CSU, Larimer County, Schools
o Private sector dark fiber leases – Level 3, FRII, i-cubed, “Yipes”
Fiber capacity
o 32 fibers are likely not available throughout the network
o City should reserve at least one spare buffer tube for maintenance
o Capacity could be characterized as “scarce”
Applicability to Future Broadband Efforts
o Backbone – could be used to connect network hub sites
o Feeder – not sufficient capacity to provide capacity beyond hub sites
Underground Infrastructure
Significant Fiber Conduit in place
o Available maps show pervasive deployment of two-inch conduit
o Feeder – not sufficient capacity to provide capacity beyond hub sites
Applicability to broadband effort
o Additional microducts can be blown in with existing fiber cable
o Spare conduit could support multiple fiber and/or microducts
o Reduces feeder network construction requirements
o Limits costly hard surface construction and new railroad crossings
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o Not appropriate for distribution network
Implications of joint use with Electric Utility
o Electric staff desires to route around structures with energized facilities
o Would require creating path around manholes
o Would avoid safety issues with non-qualified personnel
o Would limit fiber damage in case of fire or explosion in manhole
o Budget affected with creation of alternate paths
Other Assets
Substations
o Substation not equipped to handle telecom equipment
o Most substations do have space for new telecom hut (~8’ x 12’)
o Fiber conduit would need to be routed to new hut
Existing Fiber Network Equipment
o Existing City network does not appear useful for FTTP
o IT Department would prefer to be a customer of network
o CSU Manages the Fort Collins network
o No overlap beyond the use of 12-24 fibers for backbone systems
Tropos Wireless Network
o System currently used for meter reading only – not wi-fi
o Sized for collection of meter reading data – 10 routers per square mile
o Consumer broadband would require 5x – 7x number of routers (>$5M)
o Tropos 7320 routers do not support 802.11ac (limited to 802.11n)
o Expanding Tropos system for broadband = expensive distraction that cannot
perform at the same level as FTTP
GPON in Model
Gigabit Passive Optical Network (GPON)
2 backbone providers
2.4G downstream, 1.2G upstream
Single fiber delivery to subscriber optical network terminal (ONT)
Majority of FTTP deployments have been GPON
In GPON 1:32 @ 50%, utilization is 10-15% of 2.4Gbps available
Consumption tied to subscriber behavior not their provisioned bandwidth on fiber (high
breakage on 1Gig service)
Network Electronics
GPON cards and ports = $50 per subscriber
Outside Plant Materials
GPON splitters = $15 more per passing
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Technical Services
GPON splitters require four splices / eight passings = $20 per passing
Outside World – Content
Two physically diverse Internet backbone connections desired
GPON and Active Ethernet Summary
GPON – Low Cost and Flexible
2.5G of shared downstream bandwidth
Flexible splitter placement and less demand for fiber strands
High port density – 5210 subs in one chassis (10 rank units)
Consumes less space in rack and 33 percent as much power required
Supports path to 10G GPON
Active Ethernet – Futureproof
Dedicated GigE from serving switch to each subscriber
One strand from subscriber to serving switch location
Better suited for high capacity transport services
Longer reach – 60 km
Extreme fiber strand counts required without active field cabinets
Requires more fiber, space, power, cabinets, electronics and capital
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VIII. Financial Model
Base Case Assumptions
Majority of network will be GPON deployment
Costs based on similar municipal FTTP deployments
o Headcount
o Contractor costs
o Equipment
o Construction labor bids
o Software proposals
o CLEC partner terms
Assumes Comcast deployment of DOCSIS3.1 at $70 price point for gig services and
resulting impact on take rate
Capital budget is based on sample design calculated “passing cost” plus 15 percent
contingency $984/premise (see section VI.C.1 Passing Cost)
Debt interest rates 4 percent Series A and 5 percent Series B include 75 basis point
contingency
Total Premises Assumed:
o Residential: 62,000
o Commercial: 8,000
o High Capacity: 400
Take Rate: (see section IV.B Subscribership)
o Residential Internet: 28.2 percent
o Commercial Internet: 45 percent
o Voice: 8.4% high point in year 4 (0.3 percent erosion assumed yearly post year
4)
Pricing (see section VI.D Pricing Assumptions)
o Residential $70/month for 1Gbps, $50/month for 50Mbps
o Affordable Internet tier to be determined
o Commercial & High Capacity various options starting at $59.95/month for
25Mbps/5Mbps asymmetrical, up to custom dedicated symmetrical gig speed
bandwidth
Personnel at 38 headcount in year 5 with 30% benefits and 2.5 percent annual increase
(see section VI.G Personnel Requirements)
Bandwidth requirements assumed – please see following graph
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Year 0 – 5 Construction Phase
Funding
Base case modeling shows $130-150M will be needed (exact amount depends on contingency)
to fund the operations, construction costs of the new network, capitalized interest, issuance
costs, and other expenses associated with the new start up. A substantial portion of the funding
will be in the form of bonds. The bonds will be issued in the form of an A Series and B Series at
the beginning of the project. Series A is anticipated to be tax exempt at 4 percent and Series B
non-tax exempt at 5 percent.
Due to interest rate risk and possible delay in timing, the Series A is estimated at 4 percent (per
guidance from finance council which includes 75 basis pts contingency) with Series B estimated
at 1 percent more than the Series A to account for the taxability of the bond. Series A will be
primarily used in the first 3 years to fund construction costs. Due to taxability of Series B, it can
be used to fund working capital and operational needs, and additional construction beyond the 3
Amount Interest Rate Issuance Tax
Series A $64M 4% Year 1 Tax Exempt
Series B $58M 5% Year 1 Taxable
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year time window. Total bond amount also includes issuance fees of 2 percent and 2 years of
capitalized interest.
Short term debt of approximately $9M (without contingency) is also assumed to be needed for
non-capital expenditures and working capital provided that the City does not fund via other
sources. The assumed short term interest rate is 3.25 percent and withdrawals are estimated to
be taken as needed in the first 5 years. Short term debt will be paid back by fiber utility cash
flows starting in year 6.
Total debt amounts in excess of the $122M in bonds and $9M in short term debt have been
discussed to account for unforeseen risk, possible construction overruns, higher than
anticipated demand, and general uncertainty. The contingency amount is estimated at
approximately 10%-15% for a total of $130M-$150M.
Year 1:
Construction expense will focus on priority start-up costs such as:
1) $5.6M Facility – 17,300 square-feet (sf) building with 8,800 sf office space and 9,500 sf
shop
2) $2.7M Engineering - Network Design, backbone services and GPS mapping
3) $968,000 Fixed Network Equipment – Backbone electronics, core head end
switch/router, test equipment, internet services back office platforms
Debt Service Year1 Year2 Year3 Year4 Year5 Year10 Year15
Bond Issuance Cost ($2,439,533) $0 $0 $0 $0 $0 $0
Bond Series 1 Interest ($2,566,000) ($2,566,000) ($2,566,000) ($2,395,227) ($2,217,624) ($1,217,186) $0
Bond Series 2 Interest ($2,891,332) ($2,891,332) ($2,891,332) ($2,891,332) ($2,709,683) ($1,655,770) ($310,682)
Short Term Interest $0 $0 $0 $0 $0 ($61,345) $0
Short Term Loan Principal
Payment $0 $0 $0 $0 $0 ($1,887,537) $0
Bond Principal Payment -
Series 1 ($4,269,322) ($4,440,095) ($5,402,055) ($6,572,426)
Bond Principal Payment -
Series 2 ($3,632,982) ($4,636,708) ($5,917,745)
Total ($7,896,865) ($5,457,332) ($5,457,332) ($9,555,882) ($13,000,384) ($14,860,601) ($12,800,853)
Capital Expenditures Year1 Year2 Year3 Year4 Year5
Network Construction $0 $19,857,262 $20,254,819 $20,661,335 $19,211,856
Electronics, Drop & Installation $967,500 $1,918,384 $3,528,487 $4,758,262 $6,325,355
Facility, Systems, Vehicles, Start up $6,390,000 $575,400 $384,908 $119,509 $24,000
Engineering, Design, Inspection $2,713,442 $250,217 $251,233 $252,273 $278,337
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4) $790,000 Back Office Systems, Other Capital – Broadband billing system, network and
fiber management systems
Year 2 - 5:
1) Construction begins on the network in year two and finishes in year five with a total cost
of $80M. Cost is a combination of plant miles installed (200 miles per year x $4000 per
mile) and passing cost of $984 per meter and passing approximately 18,000 meters per
year.
2) Network related capital and equipment is approximately $10.2M total in years 2-5 and
includes ONTs and fiber drop materials.
3) $800,000 installation and service vehicles purchased include; service vans, bucket
trucks and heavy service install rigs. Vehicles are replaced on a 6 year cycle and
purchases begin in year two with ramp up costs continuing in years three and four.
4) Contract installation costs of $7M. Third party installers are hired on a temporary basis
to assist with the surge of installs in years 2-5. Estimated at a flat rate of $200 per pre-
install, and $250 per premise install.
Revenue
Year two is the first year of subscriber revenue. Although by the end of year 2 roughly 25
percent of the network has been installed, not all of those initial subscribers have received
service for the full year. Network installation will continue at 25 percent per year through year 5,
and estimated number of subscribers will increase by approximately 5000 per year through year
4 and another 6000 in year five.
Approximately 55 percent of revenue will be generated by active residential internet premises.
The number of homes passed per year increases by approximately 15,000/year from years 2-5.
Subscriber take rate is estimated at 28.2 percent with the number of eligible premise passings
Year1 Year2 Year3 Year4 Year5 Year6
Active Residential Premises 0 1,982 6,655 12,069 18,014 18,082
Total Revenue $0 $916,653 $4,879,311 $10,888,757 $18,211,765 $22,783,408
Year1 Year2 Year3 Year4 Year5 Year6
Residential Internet $0 $609,243 $3,193,006 $6,938,680 $11,176,790 $13,436,728
Commercial Internet $0 $69,093 $426,334 $1,091,238 $2,228,246 $2,982,146
High Capacity Services $0 $78,629 $435,359 $1,094,400 $2,099,183 $3,027,550
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growing conservatively at 0.8 percent in years 2-5 and then 0.4 percent in years 6-15. It is
estimated 56 percent of residential subscribers will choose the 50Mbps option at $50 per month
and roughly 44 percent the 1Gbps option at $70 per month.
Approximately 30 percent of revenue will come from commercial and high-capacity internet
services split evenly between the two groups. Ramp up will be delayed in comparison to the
residential segment per survey data and Uptown experience. It is generally known that
commercial business tends to adopt slower, but ultimately the take rate will be higher.
Commercial revenue derived from 45 percent take rate of approximately 8,000 premises
assumed. Uptown experience has shown that the bulk of commercial subscribers take
advantage of the lowest two tiers of service. The high-capacity market is highly varied and
conservatively modeled at five percent of commercial premises.
The remaining 15 percent of revenue is provided by residential and commercial phone service
penetration of 8.4 percent. Phone revenue decreases both in total amount of revenue and in
proportion to the internet services revenue over time. Residential phone pricing is $25 per
month. Commercial phone pricing is $14 per line per month.
Year 5+ Operations Phase
Total revenue past year five will range between $23M to $26M per year with conservative
growth estimated to level out at 0.6 percent for total revenue. All revenue streams are expected
to experience moderate population growth impacts except voice service which will erode over
the same time period.
Expenses during operations will range from $6M in year 5 to $7.4M in year 15. Three main
drivers of the operational expense are; overhead staffing at approximately 50 percent of
expenses, internet backbone expenses at 22 percent of expense, and marketing/customer
service at 18 percent of expenses.
Operating margin fluctuates between 70 to 75 percent in years 5-15, but remains healthy.
Operating income is therefore between $17 to 19M per year and is capable of servicing the debt
payments that are expected to reach a maximum of $15M.
Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15
Revenue
Total $22,783,408 $23,777,179 $24,703,513 $25,202,613 $25,383,653 $25,548,804 $25,697,621 $25,848,046 $26,000,098 $26,153,798
Operating Expenses
Total Operating Expense $4,826,271 $4,874,048 $5,217,769 $5,431,482 $5,305,943 $5,617,558 $5,817,263 $5,695,110 $5,977,152 $6,165,445
SG&A
Total SG&A $1,055,856 $1,084,269 $1,112,355 $1,136,518 $1,157,853 $1,177,155 $1,196,501 $1,216,064 $1,235,838 $1,255,816
Total Expense $5,882,128 $5,958,318 $6,330,124 $6,567,999 $6,463,795 $6,794,714 $7,013,765 $6,911,174 $7,212,990 $7,421,261
Operating Income $16,901,280 $17,818,862 $18,373,390 $18,634,613 $18,919,857 $18,754,090 $18,683,857 $18,936,872 $18,787,108 $18,732,537
Operating Margin 74% 75% 74% 74% 75% 73% 73% 73% 72% 72%
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Capital expenditures will continue past the construction phase. Subscriber churn will force
continued investment in drop fiber, power and install equipment. Gradual growth and changes
in GMA will also require marginal continued construction cost in the operational phase years.
While most revenue and expense items are conservatively forecasted with moderate growth
assumptions and fairly steady estimates in years 6-15, capital refresh is the exception with
periodic vehicle replacement needed, a $1M ONT technology upgrade anticipated in year 7, and
an electronics refresh of $6M expected in year 10.
Net Cash
Net Cash is the metric by which Uptown evaluates success of broadband initiatives. It is a form
of payback metric that expresses the year that operations of the network has generated enough
funds to pay off all the debt (although the network may choose not to pay off the debt at that
time for any number of reasons). The general rule to follow is a network is successful if it is able
to pay off all debt incurred by year 15, with the earlier payoff the better. The City retail model
currently is expected to hit this milestone in year 14 with $5.9M net positive cash flow. This is
not to be confused with operational cash flow as the network generates positive operational
cash flow (operations revenue exceeds expenses) as early as year 3, however, that excess
cash is mostly consumed by debt service until the bond balance has been paid.
Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15
Total Capital $644,553 $1,521,603 $941,828 $937,307 $6,294,844 $611,662 $608,719 $605,751 $952,031 $955,997
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14
Total Net Cash ($118,476,228) ($107,400,732) ($95,833,624) ($82,659,423) ($68,696,784) ($59,251,335) ($43,811,068) ($27,851,939) ($11,027,557) $5,940,689
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Financial Statements – Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Residential Phone $0 $109,504 $517,542 $986,360 $1,346,796
Commercial Phone $0 $50,183 $307,070 $778,079 $1,360,749
Residential Internet $0 $609,243 $3,193,006 $6,938,680 $11,176,790
Commercial Internet $0 $69,093 $426,334 $1,091,238 $2,228,246
High Capacity Services $0 $78,629 $435,359 $1,094,400 $2,099,183
Other Retail Revenue $0 $0 $0 $0 $0
Total $0 $916,653 $4,879,311 $10,888,757 $18,211,765
Operating Expenses
Internet Backbone/IPAddresses $0 $203,238 $400,342 $611,490 $914,321
Professional Services $30,000 $10,000 $10,000 $10,000 $10,000
Locates & Right of Way Fees $482,619 $266,269 $266,269 $266,269 $266,269
Staffing Expenses $968,500 $1,938,788 $2,560,898 $2,638,920 $2,884,263
Vehicle maintenance $0 $57,656 $130,015 $145,380 $149,015
Vendor Maintenance $0 $55,000 $55,000 $55,000 $55,000
Rents and Utilities $20,000 $20,000 $20,000 $20,000 $20,000
Total Operating Expense $1,501,119 $2,550,951 $3,442,524 $3,747,059 $4,298,867
SG&A
Marketing Expenses $198,750 $399,938 $402,436 $404,997 $407,622
Customer Service Expenses $104,000 $479,700 $491,693 $503,985 $660,080
Billing Expenses $0 $4,365 $14,823 $27,078 $42,188
Total SG&A $302,750 $884,003 $908,951 $936,060 $1,109,890
Total Expense $1,803,869 $3,434,953 $4,351,475 $4,683,120 $5,408,758
Operating Income -$1,803,869 -$2,518,301 $527,836 $6,205,637 $12,803,007
Operating Margin NM -275% 11% 57% 70%
60
Year 6 Year 7 Year 8 Year 9 Year 10
Revenue
Residential Phone $1,465,971 $1,411,407 $1,356,412 $1,300,985 $1,245,123
Commercial Phone $1,771,873 $1,999,637 $2,124,870 $2,145,539 $2,166,350
Residential Internet $13,436,728 $13,510,268 $13,584,171 $13,658,437 $13,733,070
Commercial Internet $2,982,146 $3,047,076 $3,113,284 $3,180,792 $3,249,625
High Capacity Services $3,027,550 $3,709,280 $4,410,780 $4,802,276 $4,874,310
Other Retail Revenue $99,139 $99,511 $113,997 $114,584 $115,174
Total $22,783,408 $23,777,179 $24,703,513 $25,202,613 $25,383,653
Operating Expenses
Internet Backbone/IPAddresses $1,365,893 $1,335,942 $1,599,992 $1,732,042 $1,612,092
Professional Services $10,000 $10,000 $10,000 $10,000 $10,000
Locates & Right of Way Fees $266,269 $266,269 $266,269 $266,269 $266,269
Staffing Expenses $2,956,370 $3,030,279 $3,106,036 $3,183,687 $3,173,985
Vehicle maintenance $152,740 $156,559 $160,473 $164,484 $168,597
Vendor Maintenance $55,000 $55,000 $55,000 $55,000 $55,000
Rents and Utilities $20,000 $20,000 $20,000 $20,000 $20,000
Total Operating Expense $4,826,271 $4,874,048 $5,217,769 $5,431,482 $5,305,943
SG&A
Marketing Expenses $338,146 $350,842 $362,932 $370,820 $375,601
Customer Service Expenses $676,582 $693,497 $710,834 $728,605 $746,820
Billing Expenses $41,128 $39,931 $38,589 $37,092 $35,432
Total SG&A $1,055,856 $1,084,269 $1,112,355 $1,136,518 $1,157,853
Total Expense $5,882,128 $5,958,318 $6,330,124 $6,567,999 $6,463,795
Operating Income $16,901,280 $17,818,862 $18,373,390 $18,634,613 $18,919,857
Operating Margin 74% 75% 74% 74% 75%
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Year 11 Year 12 Year 13 Year 14 Year 15
Revenue
Residential Phone $1,188,824 $1,132,085 $1,074,904 $1,017,278 $959,205
Commercial Phone $2,181,488 $2,190,778 $2,199,857 $2,208,715 $2,217,344
Residential Internet $13,805,086 $13,874,464 $13,944,168 $14,014,200 $14,084,562
Commercial Internet $3,310,211 $3,362,287 $3,415,181 $3,468,905 $3,523,472
High Capacity Services $4,947,425 $5,021,636 $5,096,961 $5,173,415 $5,251,016
Other Retail Revenue $115,770 $116,370 $116,975 $117,585 $118,199
Total $25,548,804 $25,697,621 $25,848,046 $26,000,098 $26,153,798
Operating Expenses
Internet Backbone/IPAddresses $1,840,143 $1,954,195 $1,744,247 $1,936,299 $2,032,352
Professional Services $10,000 $10,000 $10,000 $10,000 $10,000
Locates & Right of Way Fees $266,269 $266,269 $266,269 $266,269 $266,269
Staffing Expenses $3,253,335 $3,334,668 $3,418,035 $3,503,486 $3,591,073
Vehicle maintenance $172,811 $177,132 $181,560 $186,099 $190,751
Vendor Maintenance $55,000 $55,000 $55,000 $55,000 $55,000
Rents and Utilities $20,000 $20,000 $20,000 $20,000 $20,000
Total Operating Expense $5,617,558 $5,817,263 $5,695,110 $5,977,152 $6,165,445
SG&A
Marketing Expenses $380,296 $384,905 $389,607 $394,406 $399,303
Customer Service Expenses $765,491 $784,628 $804,244 $824,350 $844,958
Billing Expenses $31,369 $26,969 $22,213 $17,082 $11,555
Total SG&A $1,177,155 $1,196,501 $1,216,064 $1,235,838 $1,255,816
Total Expense $6,794,714 $7,013,765 $6,911,174 $7,212,990 $7,421,261
Operating Income $18,754,090 $18,683,857 $18,936,872 $18,787,108 $18,732,537
Operating Margin 73% 73% 73% 72% 72%
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Sensitivity
The Uptown model utilizes over 450 variables to mimic the City fiber network and generate 15
years of proforma financial activity. While all variables are important and can affect the City
broadband simulation, not all variables are within the City’s control, some variables are dictated
by market factors, or still other variables may have very little significant impact on total results.
In the end, only a few material variables drive the model results, and even fewer may be within
the City management’s control. The example tornado graph above indicates that three core
variables in particular heavily influence the model’s results:
1) Passing cost
2) Residential internet pricing
3) Take rate
While other factors will influence the end result, it would take a combination of other issues to
affect the model as much as any one of these 3 core variables.
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Scenarios
A number of scenarios (adjusted variables, or combination or variables) were tested to
determine impact of possible future states.
Take Rate reduction - Penetration reduced to 22.5 percent
Net Cash – turns positive in year 16
Revenue – on-going operations generate $19M-$20M/year
5 year Capital cost - reduced slightly to $106.5M due to fewer subscriber installs
Bonds - corresponding bond amounts would decrease to $118M
Take Rate increase - Penetration increased to 45 percent
Net Cash – turns positive in year 13 with $16M
Revenue – on-going operations generate $27M-$30M/year
5 year Capital cost – increases slightly over $5M to $115M with high activity levels
Bonds – resulting borrowing would increase to $128M
Capital expenses are 15 percent higher than forecast
Net Cash - turns positive at end of year 16, beginning of year 17
Revenue – remains between $20-24M/year
5 year Capital cost – calculates to $126M
Bonds – adjusts total to $138M
Active E implementation vs GPON
Net Cash – turns positive in late year 17
Revenue - remains between $20-24M/year
5 year Capital cost – approximately $130M
Bonds - $142M
Active E implementation – and- 45 percent take rate
Net Cash – positive in year 14
Revenue - on-going operations generate $27M-$30M/year
Capital cost - approximately $135M
Bonds - $149M
Mitigation and Risk
Scenario planning is useful to give management insight into potential outcomes; however, risk
mitigation should be built into the business operations of the network to properly mitigate the
potential for heavy losses. It must be acknowledged that these strategies have varying levels of
success, and some may not be feasible in a network situation:
64
1) Pilot testing and sequential spending – move forward with large expenses only after
smaller tests have proved successful
2) Timing – extension of construction timing may help financials as the network generates
sufficient cash to fund growth, if given enough time
3) Variable vs. Fixed cost structure – variable cost structure can be a safer business model
in which expenses are only incurred after revenue is assured, but it usually employs
outsourced activities, longer lead time for customers, and potential loss of margin
However, all business startups incur risk, and not all risks can be mitigated. Risks associated
with the municipal retail business plan include, but are not limited to: competition, startup,
governance, technology and financial risk. If the City Retail FTTP network is successful, only
households that subscribe for the service will pay for the network. However, if the City Retail
FTTP network were to fail, other revenue sources would need to absorb the debt originally
secured by the network. To cover the full $130 - $150M debt to build the City Retail FTTP
network, a monthly fee estimated at $17 per month would need to be charged to each
household. The $17 per month is equivalent to $2,420 per household.
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IX. Opportunities and Threats
A number of potential opportunities and threats exist within this type of venture. The following
highlight some of the possibilities.
Opportunities:
1) Possible additional revenue streams
a. Lease of dark fiber
b. Over the top internet service provider if open access
2) Market share greater than assumed
a. Additional capital costs required but additional cash flow could payback debt
faster
b. Higher satisfaction, confidence in City brand and citizen confidence
Threats:
1) Marketing reaction of large incumbents
a. Aggressive pricing
b. Signing up multiple dwelling units with multi-year revenue sharing agreements
with property owners
c. Locking up customers during planning year with multi-year contracts at
discounted prices
2) Possible legislative/political changes sponsored by large incumbents
a. Restrict municipality’s ability to add telecom into L&P Utility forcing need to
create 5th utility
b. Impact on financing could force General Obligation debt vs. lower interest
revenue bonds
c. Change in municipality’s ability to provide retail internet service as occurred in
Utah this forced a Wholesale model alternative that ultimately failed to generate
enough revenue to support debt service
3) Governance
a. City’s ability to modify governance and run a municipal broadband utility as a
private enterprise would be run.
i. Private executive sessions to discuss strategy, pricing, marketing
competitive reactions
ii. Maintain a level playing field with competition by not adding social costs
to the cost structure – i.e. low income rate subsidies should be borne by
the municipality and not by the broadband utility
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4) Business Risk
a. Take rate of less than assumed by year five will impact ability of the broadband
utility to support debt requirements (see Scenarios section VIII.G)
b. Construction cost greater than expected (see Scenarios section VIII.G)
c. Price reductions if needed to meet competition given price elasticity identified in
survey results
d. Rate risk in financing
e. Municipal organization needs to develop expertise and experience in staff and
culture to successfully compete with incumbents – business plan and execution
management
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X. Conclusion
In conclusion, it has been established that the retail model can be a robust business model. It
can withstand various typical business setbacks such as construction overruns and small
interest rate increases. It can also be financially feasible in the face of impending technological
change such as a post-DOCSIS 3.1 environment.
However, there are significant threats that are harder to foresee and forecast. These types of
threats are out of the City’s control to mitigate, such as: technological change, political will and
competitive response. While the City does enjoy strong citizen support, and a very positive
brand image, the reality is that $130M-$150M will be at risk.
It is not likely that under even the worst of scenarios that the City would lose all of the
investment with proper risk mitigation. Implementation steps and milestones could be
constructed such that unfavorable environmental effects would be minimized. However, even
without adverse conditions, it will take 12-15 years of successful operations to pay back all of
the bond amounts with operational revenue, and more than $110M will be spent constructing an
asset that has the potential to be stranded. Both scenarios are real risks that must be
considered before going forward.
68
XI. Appendix
XI.A. Peer Cities
BROADBAND
July 11
2017
ATTACHMENT 4
Overall Policy Objectives
Strategic Objective 3.9
• Encourage the development
of reliable, high speed internet
services throughout the
community
Secondary Factors
• Network reaching all residents
of Fort Collins GMA
• Timely implementation requires
base network build <5 years
• Competitive market pricing
• Outstanding customer service
2
May 9th Work Session
3
Third Party Option Retail Option
• RFP Issued May 30th
• Responses due July 5th
• Resource Discussion
• Finalize high level Business Plan
• Ballot Language in process
RFP Update
4
• RFP Issued May 30, 2017
• Scope:
•3rd Party Partner
• Complimentary skills & expertise
• Internet service experience
• Share risk
• Next steps
• Evaluate proposals and develop short list
• Initial interviews with short list
• Determine future direction & discussion
• Responses received July 5th
• 11 responses received.
• Allo Communication
•Axia
• CenturyLink
• Comcast
• Foresite Group
• Fujitsu Network Communications
• Iwire365
•Kiewit
• LightSpeed Connection
• Wyyerd
• Zayo Group
Municipal Broadband
Implementation Planning
5
Consulting resources on board June 29th - Work Scope Includes:
• Support RFP response evaluation & discussion
• Support ballot questions and materials
• Support development of Launch Plan
• Open Access vs. Proprietary system, ActiveE vs. GPON, Video or not
• RFP requirements & details for design, construction, QC,
• New billing system business requirements
• Business process requirements, definition & appropriate integration
• Organizational plans – staffing, facilities, equipment
• Marketing & Sales plan
• Refine cash flow plan by quarter
High Level Business Plan
Table of Contents
I. Executive Summary
II. Mission
III. Broadband Market Profile
IV. Fort Collins Customer Profile
V. Competitive Environment
VI. Operating Plan
VII. Network Architecture
VIII. Financial Model
IX. Opportunities and Threats
X. Conclusion
XI. Appendix
6
Business Plan
Modified Assumptions
7
Modified Assumptions:
• Pricing Update - $70 for 1 Gbps / $50 for 50 Mbps per month
• New survey to confirm take rates
• Updated take rate - 28.2%
• Financing Update – 1 issue with 2 series vs. 2 issues
• Capital variation
• 10% increase in take rate adds $4M to capital requirements
• ActiveE vs. GPON adds $12M, Video adds $5M-$7M
Impact
• Capital requirements – range $130M to $150M
• Small changes in Cashflow & Payback timeframe
Pricing / Take Rate
8
I Would Switch to
Comcast
I Would Switch to Ft
Collins
I Would Retain My
Current Service
Don't Know
3%
73%
19%
6%
17%
47%
23%
14%
“If these services were available to your home, and offer the same speed,
which of the following statements best describes your likelihood to switch?”
Comcast $110/City $70 Both $70
Demand for 1G grows
with price advantage
Investment
9
$122M Bonds I. $80M = Network Construction
II. $29M = Equipment, Facility, Install,
Engineering
III.$13M = Bond issuance cost,
capitalized interest
$9M Working Capital
$131M Total Investment
+
External borrowing of $130M - $150M.
Total investment increases if take rate exceeds 28.2% or add video
Contingency funds if:
Active E installation, take rate increases, video added, costs increase
Base Case Results
– CASH FLOW
10
($40)
($20)
$0
$20
$40
$60
$80
$100
$120
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Earnings Before Taxes and Depreciation Capital Spending Cash Flow
$M
Base Case Results
– PAYBACK
11
($150)
($100)
($50)
$0
$50
$100
$150
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Cash Reserves Long Term Debt Short Term Debt Total Net Cash
$M
Debt Capacity
• Implications to Fort Collins L&P Utilities if Revenue Bonds
Current L&P Capital Improvement Plan and Long Term Financial Plan indicate
adequate debt capacity exists within L&P to support bond
Assumes L&P needs can be met with rate adjustments and not debt
Opportunity Cost – if L&P needed access to capital during the first 5 years
• Implication to City of Fort Collins Bond Rating if GO Bonds
Financial Advisor assessment in 2015 indicated
• Capacity range varies based on the type of debt and multiple factors
• Without new revenue sources – range is $75M to $100M
• With new revenue sources – range if $125M to $150M
Near term debt requirements of $45M -parking garage, police training, I25
12
Retail Model
STRENGTHS & RISKS
STRENGTHS
• City Brand & Customer Service
• Control of construction
• Control customer service
• Strong local support
13
RISKS
• Competition - incumbents
• Business – standing up new business
• Political - legislative changes
• Governance – competitive market
• Technology – the Unknown
• Financial – worst case:
- $16 to $17 mo per L&P account
Retail Model
Risk Mitigation Option
14
Implement a fee or a tax that generates a guaranteed revenue stream
Fee = $16 mo per account Tax = .40%
Rational:
• Revenue covers debt service
• Reduces competitive & market share risk
• Less dependent on take rate
• Could offer service @ $30 - $35 mo
• Changes the complexion of the ballot ?
• Adds a cost to a somewhat emotional
decision
Implications:
• Treats Broadband as a Utility infrastructure
• Everyone pays a portion for infrastructure
• Similar to stormwater
• Change from “users will pay for system”
• Significant cost per account
• Potential negative impacts on other City
priorities
15
2017 2018 2019 2020 2021
Nov Election
Launch
Planning
Bonds
Issued
Network Design
Internal Systems & Process
Network Construction
First Customer
Municipal Broadband
Macro Timeline
Last Customer
Municipal Broadband
Near Term Timeline
16
Potential Ballot Charter Amendment:
July 11
Council
Work
Session
Aug 8
1st
Reading;
Ballot
Language
Aug 15
2nd
Reading
Ballot
Language
Silent Period
Nov 7
Election
May 9
Council
Work
Session
Internet Services Launch
If voter Approval
Detailed Business / Launch Planning
Option 1
• Broadband within existing L&P enterprise
• Authorization for L&P revenue bonds to
support telecommunications
• Modified Governance
Option 2
• Broadband within existing L&P enterprise or
create 5th
utility
• Authorization for L&P revenue bonds to
support OR authorization of general
obligation bonds to support 5th
utility
• Modified Governance
Ballot Question:
Ballot Question Development
For Illustration & Discussion Purposes
• Ask voters to change the Charter to expand and include telecom (broadband)
services within L&P Enterprise
• Required in the event the City provides telecom service directly or in partnership.
• Allows the L&P to partner with a 3rd
Party and allows L&P the ability to provide
telecom service if a third party option is pursued and fails
• Although bond issuance does not require a vote, including a question on debt
ensures voters are aware of the investment/cost risk to provide telecom
infrastructure
• Allows Council to go into executive session and the ability to delegate some
decision making to a governing board or the City Manager
• Hear matters that if public, would jeopardize financial feasibility
• No decisions can be made in an executive session
17
Ballot Question
Recommendation
18
Recommendation:
Option 1
Rational:
• Leverage L&P debt capacity
• Uncertainty on need for a 5th utility
• More community discussion required for GO bonds
Draft Ballot Question
For Illustration & Discussion Purposes
19
Shall Article XII of the Charter of the City of Fort Collins, pertaining to municipal public utilities, be amended to
add a new section authorizing City Council, by ordinance and without a vote of the electors, to authorize the
City’s electric utility to acquire, construct, provide, fund and contract for telecommunication facilities and
services within and outside the City’s territorial limits, whether directly or in whole or part through one or more
third-party providers, to include, without limitation, the transmission of Internet data, voice and video, and to
authorize the Council, in exercising this authority, to: (1) issue revenue and refunding securities and other debt
obligations as authorized in the Charter, but in a cumulative total principal amount not to exceed
$150,000,0000; (2) set the rates, fees and charges for these facilities and services subject to the same
limitations in the Charter for setting the rates, fees and charges for other City utilities; (3) go into executive
session to consider matters pertaining to issues of competition in providing these facilities and services to
include, without limitation, matters subject to negotiation, strategic planning, pricing, sales and marketing,
development phasing and any other matter allowed under Colorado law; (4) establish a Council-appointed
board or commission and delegate to it by ordinance, in whole or part, the Council’s governing authority and
powers granted under this new Charter section, but not the power to issue securities; and (5) delegate to the
City Manager by ordinance, in whole or part, its authority to set the rates, fees and charges for
telecommunication facilities and services?
______Yes/For ______No/Against
20
Council Discussion
1. Does Council have desire to further explore a fee/tax to reduce risk
2. Does Council support bringing a ballot question forward in
November ?
a. If so, Option 1 or Option 2 ?
3. Does Council prefer messaging the ballot question as:
a. Question focused on Municipal Retail Option only ?
b. Question that allows 3rd Party or Municipal Retail alternatives ?
BACKUP
21
Ballot Question
For Illustration & Discussion Purposes
22
Telecommunications within L&P Enterprise – Option 1
The Council may, by ordinance and without a vote of the electors, acquire, construct, provide, fund
and contract for telecommunication facilities and services within and outside the City’s territorial limits
through and as part of the City’s electric utility to include, without limitation, telecommunication
facilities and services providing for the transmission of Internet data, voice and video
Telecommunications within new 5th
Utility – Option 2
Same as above with the addition of:
Alternatively, the Council may create by ordinance and without a vote of the electors a
telecommunication utility to exercise these power for furnishing such telecommunication facilities and
services within and outside the City’s territorial limits. If the Council creates a new
telecommunication utility, it may also establish that utility as an enterprise of the City in the same
manner, with the same powers ad subject to the same requirements and limitations established
under Section 19.3(b) of Article V of this Charter for the City’s other enterprises.
Ballot Question
For Illustration & Discussion Purposes
23
Authorization of L&P revenue bonds up to $150M – Option 1
The Council, acting as the board of the electric utility enterprise, shall have the power to issue
revenue and refunding securities as authorized in Sections 19.3 and 19.4 of Article V of this Charter
to fund the provision of the telecommunication facilities and services authorized in this section
Authorization of GO bonds up to $150M – Option 2
Same as above with the addition of:
The board of the telecommunications utility enterprise shall also have the power to issue general
obligation securities as authorized in Section 19.2 of Article V of this Charter to fund the provision of
the telecommunication facilities and services authorized in this Section
Ballot Question
For Illustration & Discussion Purposes
24
Executive sessions & delegation – Both Options
….the Council, and any board or commission established under subsection (e) below, may go into
executive session to consider matters pertaining to issues of competition in providing the
telecommunication facilities and services authorized in this Section, which shall include, without
limitation, matters subject to negotiation, strategic planning, pricing, sales and marketing,
development phasing and any other matter allowed under Colorado law.
….the Council may, by ordinance, establish a Council-appointed board or commission and delegate
to it, in whole or part, the Council’s governing authority and powers granted under this Section….
….the Council may also delegate by ordinance to the City Manager, in whole o part, its authority in
subsection (c) above to set the rates, fees and charges for furnishing telecommunication facilities
and services.
Survey Objective
& Methodology
25
Objective: Evaluate residential pricing changes made by both Comcast and the City since the August 2016
Uptown Feasibility Study on FTTP pro forma
Impact to City residential Internet penetration level
Impact to City 1G dispersion (% of subs taking 1G versus 50M tier)
Sample Design: Total sample size of 400 respondents, separated into two cells (n=200 each) to evaluate
Comcast 1G pricing at either $70 or $110
Cell A: 200 tested at Comcast 1G Internet for $70/month
Cell B: 200 tested at Comcast 1G Internet for $110/month
Pricing Metric 2016 2017 Financial Impact on City Pro Forma
Comcast 1G
3 Year Contract $70/mo. $110/mo.
Increases City FTTP penetration
potential
City Tier 1 (50M) $40/mo. $50/mo. Decreases City FTTP penetration
potential
City Tier 2 (1G)
Charter Member
$50/mo.
($10 Buy-up)
$70/mo.
($20 Buy-up) Decreases City 1G tier dispersion
City Take Rate
by Market Scenario
26
Across three (3) residential surveys, Uptown has identified the expected City take
rates for residential Internet service depending upon both Comcast and City pricing…
Study conducted by Uptown Services, LLC
Source Scenario Comcast Offering City Offering
City Penetration
Outcome
2016 Survey
n=400 Pre-DOCSIS3.1 1G Not Offered
50M: $40/mo.
1G: $50/mo.*
38.8%
2016 Survey
n=100
Post-DOCSIS3.1
1G: $70/mo.**
30.2%
2017 Survey (Cell A)
n=200
50M: $50/mo.
1G: $70/mo.* 28.2%
2017 Survey (Cell B)
n=200 1G: $110/mo.**
50M: $50/mo.
1G: $70/mo.* 30.4%
3rd Party Model
STRENGTHS & RISKS
STRENGTHS
• Experience - fiber design and build
• Experience as an ISP
• Financial Partner & Resources
• Better Technology
27
Viable Alternative – Experience & Financial Resources
RISKS
• Loss of Control
- Customer service and technology
-Pricing
• Partner Change of Control
• Time – delay if Partner not successful
Sensitivity
28
Prices reflect subscription to Internet service at non-promotional rate as of March 2016.
*Not available in all areas of Fort Collins
The pricing above reflects published prices as of March 2016. Pricing is very dynamic within the
market and can change frequently. Bundled services that include video and phone and
additional charges are also utilized, making it difficult to develop price-to-price comparisons.
Furthermore, citizen satisfaction with their DSL and cable modem broadband service is among
the lowest of the 24 markets surveyed by the broadband consultant group Uptown Services.