City Council - Special Meeting

well good evening um thank you everyone for being here uh I um and so just everybody knows where they are this is the presentation and workshop for the city's Network fiber fiber Network comprehensive plan and um and so I will start out with introductions and just uh I'm Joel fun I am the um inter of co-director of Public Works and we'll just go around the them and maybe start I'm Miker I'm the other Co director director works Mike the network oper for the city Don verdick IT director Steve Hogan superintendent of traffic parking and fiber City Don Gavin City's fiber optic network engineer St with Uptown Services we are broad consy Shaw D partner Uptown Hanna Stone Bell City Health member works I sat on the advisory work grou skler I sat on the work group as well Lisa Anderson and I'm part of the committee Forest Longman uh Deputy Administrator Jason Maron deput Rebecca Library director uh Todd lagy commissioner for walking public utility T Public Works goo Bing public schools and I sat on my I'm Michael sorry City Council L line director for planning we had a couple people right the end yes my name is Steve Spitzer and I was on the Broadband Advisory Group I'm David Roberts I facilitated the Broadband advisory great well thank you everybody for being here this evening um just wanted to start out with a few introductory remarks and set the stage and then I'll hand it over to Neil and Dave and John to go through the the details of the presentation um so the really the purpose

of this meeting is really to get into the in-depth information that it went into all this work to develop the fiber comprehensive plan um this uh this body of work is is pretty detailed and it's been really interesting uh hearing it hearing it as it's come together over the last uh 10 12 months and um and it really we wanted to share all of this information with members of the um Broadband advisory work group and council members but it was really more information than we really could share like at a committee meeting or something like that so we felt like this was a you know this work workshop format is really a good format for us to kind of um get into some more detail than we typically would um that does mean that it's you know because it's more of a workshop format we we don't have um you know we aren't facilitating public comment this evening um the idea is that this would just be discussion information and that staff would be ultimately bringing information you know a more condensed information back to the public works and natural resources committee for uh more you know more discussion and uh look for additional ction and that type of thing um and so uh just a real short introduction uh of some of the topics we'll be talking about you know a little bit of background on the network uh this the network that exists today really has functioned very well for um what its intended purpose purpose was which is to provide fiber optic connectivity for the city originally the

traffic signal system and um we've been able to leverage that to help a lot of different um public uh public partners and with their uh con activity needs and um and including the the Public Schools lton transportation Authority it also um supports the regional 911 system and um lton County's emergency Operation Center uh this effort was one of the outcomes that came out of the Broadband advisory work group is the need to do more work and to do this fiber comprehensive plan and so um we took that seriously that recommendation and and um after that uh we brought John on we've um we've uh brought on the consultant and um so I think this is I think you'll be pleased to hear their results and kind of the more detailed analysis um of course with the goals of the plan we wanted to increase the redundancy and the liability the city's existing fiber optic Network um we wanted to help guide the development of high quality infrastructure for managing the improved Broadband Network and then um expand and improve the network Broadband capacity and services in a financially self- sustaining um manner so um Uptown will get into some of their detailed analysis but I think in summary I just wanted to you know kind of cut to the end and say know we've looked at uh three different possible service strategies that were evaluated we looked at least dark fiber uh we looked at least lit fiber and then uh last smile Broadband um to improve and expand Broadband capacity within the city and I think

we found that all those are feasible in some form or another but um all of them would Pro you know provide would require even in a in a medium long term a level of subsidy by the city to continue to operate but um that's kind of cutting to the end but I figured um we get kind of get that out there so you can kind of as you're listening know that that's that's where we're um where you know where we're headed the end but um with that if there aren't any overall questions I'm going to turn it over to uh Neil and Dave and John to go into some of the details yeah sounds good do you have any opening remarks I'm good okay all right so I as I said I'm Neil Shaw I'm with Uptown Services uh I'm officed out of Boulder Colorado so I feel right at home here in in Bellingham uh one of my daughter's friends is actually going to Western so uh he's really looking forward to that and in as far as the practice how we're organized uh I do all the technology and engineering and design pieces and Dave does everything else so I got the good part of that relationship so as Joel said the the study objective was really to uh develop a comprehensive capital and operations plan to move the city's fiber Network into a carer class infrastructure and um and possible create some additional revenue streams and making it economic wherever it's economically feasible and so our the scope that we proposed for the scope that was in the RP that we won involves a lot of different steps what I want to cover before I

turn it over to Dave was the process of updating the existing INF structure documentation taking a look at it and making recommendations and then identif find locations for new and replacement infrastructure let's talk about task one first our process and then the outcomes I'm going to go through each one of these individually so in terms of data collection and organization uh we drew from several sources but the First Source was the the base GIS information which is a geographical information system it's it's uh it's an application where you can model things with points lines and polygons but basically the city provided us with the information for vaults conduits cabinets fiber splice points fiber what we found was that uh GIS covered most of everything that was in the network but it did lack some key attributes for each point or line and that is something that can be improved over time um and and if you were to move forward with the with the carrier Class Type U definition of the network to make it more operational I think that GIS system the the lines and points should probably be redrawn just to make it more useful operationally the other piece which is even more important than the gis is a system called OSP Insight it's a separate system than GIS but they're they're related because there it's a mapping type BAS system and the op Insight system is used to model the connectivity of the fiber Network at the Strand level so for example if you wanted to go in and understand

where the port on this patch panel in in one of these Offices here where that actually goes and ends up on the other end you would use OSP insight and it would tell you for that fiber strand what port it starts out at what strand it leaves the office what strand is spliced to and then what Port it comes out on at the other end okay so that that's very useful in terms of understanding about the the nature of your infrastructure and characterizing it um what we did find there was the system needs additional updates to accurately reflect what's actually going on uh it's pretty accurate but there needs to be some changes there um an OPN sight is not used to manage or edit the conduit um or vault layers and so they're separate and it's a little bit of you know the old days what we call swivel chair uh so it'd be good to address that to make it more user friendly there and so there are some process and content improvements that will need to be made over over time third party sources this is something that uh was in the scope and you know the desire was to go out and ask uh lumen zipley and stound you know can you can you give us your F information and we'll put it on this map and then we'll see where the gaps are stuff like that well we we did attempt to get that information it was difficult and really not a big surprise to us because private Riders are very protected of that information um so that was that's the background on that so one of the things that I think was uh a gap in

the and I think the group realized this after the fact was that the first study didn't really involve much field work so that so this study was very field based um and so we worked with John and his team to go out and scope what we wanted to look at in the field and then the city provided great resources when I came here back in November to go out and actually lift lids and and look at different things so we we said the two things that we want to focus on are looking at splice points uh critical splice points in the network that are underground that those are the main trouble spots of the system and then we also want to look at the patch panels a patch panel is a is a termination of a fiber cable that has ports you actually plug plug cables into the front of the patch panel and so we wanted to audit all the patch panels that were in the system at every at every location on the core ring um and then we also obser fiber specific field cabinets that are out at the intersections so in terms of the splice Bal inspection process uh prior to coming here we created maps of each location uh we identified 56 locations that met the criteria of what we wanted to go look at uh I went out with these great traffic guys I'm sorry I can't remember their name now but they're very helpful uh P the Vault WID look down in the fold with the picture took a look at what the condition of the of the The Vault was and then made note of whether I believe that it was a fiber ready Vault that that could

accommodate more fiber connections or if not what repair or rehab was required to make it fiber Ray because that's really these are the key locations that are going to define whether your system can support a carrier class service okay then the next thing we did was we went to all I think there were 10 locations on the Node on 10 node locations on the fiber backbone system at your key City facilities and data center facilities and so we went and we prepared books ahead of time of what OSP Insight said was supposed to be assigned at each Port each patch panel and then went and observed uh what was actually plugged in to each Port made note of it and then coded everything according to in use open or not terminated then we flagged that we flagged the statuses that didn't match up with OSP insight and then Downstream work with John to to make some to reconcile some of that so when we talk about trying to you know convert this into a carrier class Network and characterize our ability to uh generate Revenue okay um we have have to really understand the value of the asset is really is really rooted in how much how much available capacity is there on this asset because a fiber cable might have anywhere from six fiber strands all the way up to 432 fiber strands so we need to understand how many fiber strands are available for use by either the city or third party um and so we used uh the OSP Insight system to really go through and and look at uh using OSP Insight after we came back

with the patch panel audit and John did some updates then we were able to to within OSP Insight go to each patch panel and go to each port and use this tool called taper report and we could trace virtually each Port from where it started all the way through to the end and then look at what how is that coded within OS insight and is it really available or is it really used and so long story short we were able to come up with a really good idea on each Cable in each cable segment how many fibers were available for use either for the city or through to at least to a third party so I mean there are a couple couple steps that we would recommend following this and that would just just be just your standard quality control with an OP Insight because there were some traces that we that we conducted where we go through and there's a trace and then it goes from splice point to spce point strands are not coated the same throughout the entire run so in terms of the results of the field inspection and audit results of the outside plant which are the conduits the vaults and the fiber we looked at 50 to 60 locations where these BS where the splice points were in the vaults we took pictures and 40 of them came back as suitable to support whatever's in there or future expansion for more cables coming but then 20 vaults either needed to be replaced with something bigger because it wasn't adequate for the infrastructure that was in the vault or significant rework needed to be done to arrange

the cabling and the wiring differently um to be able to support fiber infrastructure terms of the splice cases as as Joel mentioned this deck is 138 pages long gate so I don't normally present this level of detail to a group like this because a lot of this you're just going what is he talking about or I wish he'd I wish he'd move on but this is important because the splice cases that were in the network that are in the network um are predominantly Legacy uh preform Line Products coyote closures they're large they're big closures they're 22 in long and um these are not being used anymore and so it's a combination of these large cases and then the small environments they're being placed in that's causing some qu that's causing some problems and that that are driving us to want to either replace these splice cases with smaller models or increase the space these spli cases are in so um and in terms of the conduit so we have a bolt and we have a lot of wire in it and then we have conduits that are coming into this and going out this location and so um in most of this conduit if not majority of this conduit is in a street light system so a street light system is designed for copper based cabling so just like in your house you can run RX and you can you can you know bend the roax you can put it into a small tight loop it's going to workless you Nick it but fiber cable is not it's not made to be kinked or coiled bu too tight it needs a certain um environment to live in over a period

of time it can't be under stress and it can't be uh what's called the bend radius that can't be violated or over time those individual fiber strands are going to start to feel stress and they're going to start to develop deformities so um 58 of the conduit entering these vaults that we observed uh have a fill rate of less than 50% which means that using the same methods that the fiber was used to pull in it before you can get a couple more cables in that kind okay um both conduits were observed to have a 75% Bill rate so not a lot of room but maybe room for one more cable and the rest of the conduits that we looked at 45 of them were completely jam packed the stuff and if you be challenged to get the stuff that's jammed in these do it's out of it much less get another one in so um and we'll SE some pictures in a minute fiber cabinets were all awesome okay so these are my feet so we took pictures at every location we sent the pictures to Sten and these are just some examples of some of the some of the issues so this is the this is that coyote clamser um closure and this is a this is a vault that was specially built for fiber facilities so you know the diameter of this vault is built to accommodate a decent Siz Bend radius for cable but you can see that this this closure really isn't oriented properly in this Vault so it's creating this Kink here and this is this is a violation of the specifications both cable and the the closure so that needs to be addressed either with a with

a smaller closure or a a larger ball this is your standard uh iron Hole uh handle that for street light for wiring and this this might be a there's probably a street lamp next to this this is the lead wire for street light but and then there's a bunch of dirt in here which which does have happen over time and it's very shallow so it's only you know about 8 in deep this is fiber cable that's that's in here and this isn't the right environment for this so this would need to be upsized to a 24 by 36 volt it's deeper uh this is just too much wire and too small of space but all these wires serve a purpose don't ask me what the other wires are for I think they're from you know Loops or whatever but these are Big there's you know probably 24 pair of copper wire in there going somewhere and then all this electric wiring and then this is the fire so that needs to be upsized um this is just a lot each one of these is a fiber cable very large cables lots of fiber in this thing so and if you were if you were to come upon this thing at 3:00 in the morning because you had you know AT&T is out as a customer and you're in here saying oh my gosh how I know the problem's in here because the trace is showing up at the problems here you start pull you start trying to pull this apart and you're probably going to be causing more issues okay because you can't tell what's going on here because it's so full so this needs a this needs a larger ball okay again this is too shallow dirt builds up in

these over time just from uh moisture and other things lots of interesting uses Gables and then here just too much stuff there's there's a closure here that's that fiber Ked here and then there's all this these large copper wire cable um you know the fiber caes pain so that that's a problem but you know the bright spot these cabinets are awesome every one of them very well designed very well implemented and these are the patch panels we did we didn't shoot any of these panels we all these patch patch panels are similar to what we had in the in the uh no locations so what so now we want to do is we want to take all the results from our field audit and from everything else mainly OSD insight and our Tracy we want to characterize City fiber Network here in total say let's define or let's let's create this little traffic light type color scheme to say where's the fiber available and so what what we did was he said okay we can look at where fiber is available but really before you think about um future applications you need to have a spare amount of a minimum amount of spare fiber in each cable no matter what you never use or or lease out 100% of your strands you always want to have at least 12 fibers available not more and so we looked at every we verified all the cables that are 24 fibers are higher connected to a primary patch panel both in person and an OST insight and then we assume that you want at least 12 fibers set aside for future use or mainly repairs um and so what

what we came up with was there's 224 cable segments with more than 12 fibers and 166 of those segments have at least two fibers of aailable after accounting for 12 spares that comes up to 2200 sand miles the reason that's important is because that's the that is the typical measure that's the typical unit as it relates to revenue opportunity for that fiber to strand at the eight of those segments we verified as having less than 12 fibers available so that's how we coed this might be kind of hard to see from back there but basically all these R red segments are no go the Orange is 2 to 24 available yellow is 25 to 48 and the green is more than 49 so the other way that we're kind of slicing and dicing this a little bit is to look at the outside plant characteristics so the outside plant like I saying before is a uh it's it's cable it's conduit it's Vault it's poles so over time the city is either built or acquired different cable assets and they've installed cable assets under the ground so the blue are aerial so the blue is overhead fiber um who did you buy the overhead from down here P was P yeah P um and then when we look at the availability of just for the overhead segments of the network you can see that the overhead fiber is almost all at least 49 of the opal strands or more okay so that that's a little ray of sunshine coming down okay so when we look at the valuation because a big part of our scope was to say you know try and generate some incremental revenue and make it

a self- sustained Enterprise through you know commercial sales to carriers maybe large businesses so the first piece Joel mention was conduit leing and dark and then dark fiber leing so uh conduit that all the fiber is in most of the fiber is in wasn't meant for fiber cable and so we would not recommend and that you would just you would blanket lease or offer least capacity and most fiber of those conduits excuse me what did you just say you said it wasn't it wasn't built for fiber cable the the majority of the conduits that the fiber is in is a street light system it was it was engineered for copper wire which doesn't have this Bend limitations um thankfully the sweeps are not elbows they're still you know 18 12 18 inch sweeps which in a pinch will work for certain F size fibers I mean uh we Uptown Services designed an entire fiber to the home system for the city of Beverly Hills that went in their streetlight system but it took it took very special and specific specifications that are kind of the uh you know the horses out of the barn here we can't do that here so so we would say don't count on leasing any of that conduit because you can't support it and it would not be a good business decision uh same thing with dark fiber leasing of your underground cable we are we are making recommendations for how you need to go about upgrades rehab for your underground fiber system and maybe you could think about it after that but based on the based on what what I saw in the field I

would not recommend leasing any of that fiber um to a third party now if certain opportunities may be possible someone comes and John and says I want you know 500 feet from here to here then John can say okay let's go look at it and then it would be there would be caveats there would be you know you know what you're what we're looking at here um and so that would that now darkfire release on the aerial cable yes all that stuff that got from the Pud a lot of that not only has capacity but is also was installed in an industry standard manner so that would be available if if that were something that the city wanted to pursue so excuse me sorry I have another question so what is the percentage between the two between the um the aerial and the rest of it that that you're basically saying leave it alone don't touch it we'll get into that with Dave's numbers uh I would need to get on my computer and look at that specifically but we have we have the Strand strand miles of the aerial versus the underground in our study they're not they're not top of mine for me right now but that's okay I can get that number for you later okay so in terms of the summary of the inventory um this system like Joel said the system be working for the city and its St and its other stakeholders Public Works has done a masterful job of getting fiber in that street light conduit keeping it operating they should be commended for that um however we need to implement the industry standard uh practices or the

system going forward okay spare fibers that we've that we've calculated um as available uh those can be used by John and and the other folks within the city to create more resiliency right and so we've identifi the spare fibers on every segment and and the city T folks and fiber folks get together and they can discuss okay well this is a route I want to bolster this is a back this is a secondary route that I want Place curent underground fiber networks are not ready to support private Network operators but certain aial routes are okay so the next steps involves task two so any questions on task one and keep keep them coming because otherwise uh ask one just go back yes one which which part of it I just want to look at it I assume we'll get a copy of the slide deck yes I yeah thank you okay okay so as it relates to what what needs to be built or installed as a result of our audit in our assessment um the process that we went through involve defining the long-term routes required to create resiliency within the city and so we'll we'll talk about that here in a minute um but we basically wanted to characterize those 228 fiber segments into what are the primary ones what are the secondary ones and what are the tertiary ones as it relates to routing and and what they connect to so we'll talk about that but before we really understand as before you really understand which items that you want to go out and upgrade we would highly recommend that you do additional testing of the fiber

Network so those patch panels have over 2,000 ports on them and we would recommend that you do a trace on each one of those ports in both directions and that will allow you to see it's called otdr testing and so and uh that's called Optical time domain reflect reflectometer testing which means that you send a pulse of light out and it back and then it gives you a graphical representation of what that light did as it went out that fire and came back it will show dips it'll show spikes it'll show where they're problems okay so if you have a kink in the cable that will show up on the trace okay and so you would use those traces which are which have a a Distance on the x-axis you'll use those traces to identify trouble spots you need to go out and fix right now we are assuming that all the street light vaults are going to have to be be upsized especially the ones that we didn't go to but there's a lot of them that are small okay but once you do that that otdr testing then you can go out and finalize the street LW street light BS need to be replaced and then and then finalize the routes requiring fiber capacity we worked with John to understand okay of these routes which ones are fully exhausted and the good news is there's only one that we saw and that John recognized so we'll talk about that okay so when we look at the proposed ring and how we're characterizing primary Rings secondary rings and tertiary Rings the primary really is where all these node no locations are so in

terms of how the how you would roll out your upgrades how you would roll out your Capital Improvement plans it would be this first and then this piece and then the rest and when we look at at the structures fiber structures which are hand tools basically the little ones all the way up to the big ones where are they and how many are they there's a lot so just on the core on the core ring alone there's 192 now you would in the worst case you would budget to replace all of those uh but in reality when the otdr traces come back you probably won't see all of them have issues so before we talk about the numbers I just want to touch on our Capital budgeting process for our studies we typically use recent recent uh bid results through Uptown clients that are deploying Broadband systems we talked to other Broadband operators in the region local experts and local outside plant contractors and that's what we did here so we you've had a lot of uh success in with our Pacific Northwest clients especially in Oregon and those those clients include Hillsboro and clas County two very pic fiber operators uh stepen turned us on to sale electric and they helped us with the actual vote for doing the Vault replacement and then John was great and Melissa was generous with her time uh And discussing same types of things so that was very helpful so in terms of of our cost estimation terms of what you might want to budget to get these things done fiber testing is you know 2400 ports about 40 bucks per

trace and then another $20 to review the trace results so about 144,000 for that piece that would be the first thing that you'd want to do then the street light handle upgrades okay we would recommend planning on replacing these with the 24 by 36 by 24 ball and that you would that you would wreck out whatever's there now and instead of trying to separate the fiber from the street light that you would just put a larger one down and the larger ball would would not have a bottom in it so you could just place it right over the top um I think it's going to be too difficult to try and separate everything you just need to give it more room to breathe happy and then at the same time you want to take a look at how the conduits are coming into these balls so in a lot of cases when you're dealing with just copper wire conduits come up pretty close to the lid because that copper wire just come right over the top you can actually you know bend it and and have it come back down well the fiber doesn't like to do that fiber likes to sweep and so you're going to want to at the same time replace the conduit sweeps to be like 24 in instead of 12 or 18 um and sale uh I've learned working up in the Pacific Northwest uh just to take my heart medication because every time I get a a quote I just can't believe it but each one of these locations is almost $10,000 but that's just the facts and so uh because almost all of them are in har surface it's going to require uh concrete replacement um and so

yeah it's very expensive but you know that's why you hired us is to is to quantify the things that need to be done and how much they would be so this is $8 million as you can see the units the units there's 845 of these handholds and a lot of these are the little ones uh this is the route that John along the bay that is exhausted between what the city's using and is UD yes sorry um and so we're this is a 36 fiber cable here that's fully utilized and we are budgeting to replace that with the 90 not replace it but override it with a 96 fiber cable after all the conduit Vault work is done and so conservative estimate for labor materials of $5 a foot with the footage involved we're talking about $120,000 and then last but not least um you know we we we talked about where else should the city deploy fiber and this is a this is a chart that um uh who Mel I think had that the city provided I think this is something that the city might maintains in terms of hey this is our wish list for road projects or water projects that are occurring and if it's in these if it's in this magenta any magenta areas throw in some Fiber conduit and we think that is the best way to address that because there's so much of it that it it would be hard to prioritize and if we were able to if you were able to implement Vault upgrades conduit upgrades understanding where your available fiber is you can create a lot of the resiliency that you're looking for here through existing fiber so that's the main

takeaway there's lots of fiber assets available if if not suitable for third party Revenue generation very suitable to harden the system that you're currently operating with redundancy and resiliency so thank you for your time I'm gonna turn it over to Dave to talk about much more interesting stuff yeah I have a couple questions of course what's the timeline uh what did we budget I think we budgeted like you know five years one of the things that um all of this this this is 100% contractor okay so um you could go as fast as you want it here and maybe get it done in three years but but or two years but realistically it's probably a fiveyear build out yeah the projects are going out so contractors are pretty TI yeah given the kind of addition of the mapping and how crowded these vaults are uh How likely is it that there would be outages and you know maybe how long would those last over the course of upgrading um there's always the chance that there's going to be outages but um I don't I think it would be worth the risk I mean you make a good point about the mapping I think that is something that uh you know that should probably be done in parallel but yeah it's something that has to be done yeah even even if you are going to incur outages because you know thankfully the outages would not involve you know internet service from Seattle to all people live here right it's going to City Department outage just not good we can schedule that right with the we always looked at that when

we're making any changes to the fiber Network that were notifying the potential unpack at City clients and most most of this won't involve even opening up splice case that'll be very carefully organizing every on the sidewalk and then getting it back in where it belongs but one of the things we constantly heard The Advisory was that this was a patchwork it was like a quilt right this area went and then okay we're going to do this area and they were never connected and they were never really harmonized yeah is that going to change when do this so that it'll look like a really beautiful quilt as opposed to a patch for yeah yes the quilt a circular quilt and my other good question is we've heard a lot about infrastructure from the federal government we've heard a lot about State funding from governor rley and his office that a is that still going to be available by the time we get here probably not how okay you talk can you go back to I think the one of more most recent ones the one with the magenda and the blue yes okay so green so green is the current Network yes and magenta is things we could add again more for City's purposes but you're saying that adding the magenta would also create a great de redundancy in and therefore resiliency in our system well yeah thank you for asking that question because what I meant what I what I meant by what I added was that uh the magenta are it's a wish list from City departments that want more redundency and resiliency I believe but if if

you were to implement what we're recommending and utilize spare fibers um that we've identified you can have a lot of redundancy without all this outside plan expense so then I want to go to the three rings you talked about primary secondary tertiary and I believe the primary yeah so I won't I want I want to S understand that map relative to the green one because they're not the same is that pink primary ring can I find the entirety of that on the current green Network yes can I find the next one the the yellow ring can I find that entirely all the is green and the all that is green so there's some not on there Spurs yes right and so this is then is of that Spurs system we can then color code three different Rings primary secondary tertiary and that's where you would suggest ISM that's the other way to get through a dasty yeah for example uh we're here right so uh right now there might be a a connection from here to well there's a there's a data center out here right what's it called here so right now so right now there might be a connection from here to here that's just a but what what you could do is you could you could fire up an alternative path on a ring connection so that if this connection was cut you just convert over you would just fail over to that other ring I mean it's a pretty crude example but that is what that is what you could do now you're probably doing that now already but now you you can meet meet together and and say oh well yeah look at fire availability

Neil next question with regard to this being um a useful Carrier class asset for non-municipal users yeah now tell me about the different value of this really neat and elegant ring approach to strengthening the network as opposed to the magenta version this seems to be designed to optimize its current function and its current territories right as as opposed to a third goal which might be to give it a confirmation of topology a geography which is attractive to others attractive to communities or underserved areas what is does that map look the same as this or or would you have to add a different would you have different lines you'd want to strengthen or add this would be the same that mean you would you would you would implement this to support what you want what you're talking about it's just that right now the the quality and your ability to support um very very high capacity 10 gigabit services on your system is is probably not there okay this is foundational for many things yeah the city first any other questions okay only 100 slides left so I'll try to go quickly uh but I do want to cover the details because it's you know 10 months of work um but again if you have questions please stop me I know this might be a little hard to see so let me know if I need to explain something so task three we're going to kind of get into the business strategy and so in terms of that and this notion of enhancing the current Network to be carer grade class um really is about the ability to

go beyond internal Services right it's really uh to kind of take a Next Step potentially to offer services to the community if you will and that could be uh services to other isps that need transport um it could be to commercial accounts that are large and want dedicated internet access uh it could even be a Last Mile system that offers service to residential customers so this is kind of going to be the framework for the rest of the report and Joel mentioned in his introductory remarks the three models that we looked at so if we kind of just open it up wide open and say from where you are today to where you could go if you enhanced this network and made the necessary investment what are the business strategy options what can that look like and and if we cast a wide net it really comes down to these three things here and this top one is what we're going to call middle mile data services um so it's about middle mile meaning it doesn't go to Every household but it's an ability to make further investment to serve commercial customers and there really can be two flavors of this one there can be non-lit which is just leasing dark fiber strands so you know you have point A to point B and let's say an internet service provider need some backbone capacity to uh supplement their uh service offering and their territories that they serve for last M service well they'd be a candidate here or we start fber access and then the next step up from that would be that you could deploy the

electronics to actually light that fiber and provide actual internet service to an end user and that could be a commercial account um and we'll talk about what that can look like and within this there can be different models here in terms of retail or wholesale we're going to focus on retail um here so much it wouldn't be wholesale you could Outsource certain functions you probably wouldn't go into a full whole sale modelable M Services um and then in terms of how this would work just from a a revenue standpoint in a business case uh if you take this kind of strategy uh the beauty of this is you can build after you sell so if you get an account get a request for transport for connectivity uh your commercial account rep makes a sale uh you you can look at the business case look at the investment return and then you can make the investment after you know you've got a revenue stream there um this one's harder to predict when we get into the financial results it's a little bit tougher um because there's a smaller Market here uh and it's pretty competitive as I'll show you um compared to last Mile and last mile is what we're calling um scenario 2 um which would include this here as well you probably wouldn't if if you did offer last mile you probably wouldn't continue to lease dark fiber but you would lease lit Fiber service but last mile is where you fully build out the city and you offer standard internet service to commercial accounts and residential households okay um and

again this can be retail or wholesale um here you have to build first so it's the opposite of the middle mile strategy you've got to make the investment up front and pass every home you don't make the final investment to install what's called fiber drop and actually connect the customer until they sign up but there's still substantial investment to pass every premes in the city um this is much easier to financially predict um because you have a lot of large numbers here through ma Market um so it's easier than predicting middle mile revenue streams Within These where we're going to go forward now is we're going to look at what would the services look like for each of these so what's the service offering what are the price point um and then we'll look at some market research so we did research in this segment and we did a separate research effort in this segment and we'll go through all that there's quite a bit of detail there especially in the residential since that's such a large price day um we did some pretty extensive quanita survey look there um and then with each of them after you go through the research we're going to look at the financial analysis and see what the investment requirement would be so we don't make any normative statements we don't say should do this you should do that um what we're really going to Define for you is what this would look like in terms of investment so that you're fully aware of that you know what would the bond amount have to be if your

bond would have you and what kind of financial returns does it look like and in fact as was mentioned at the outset would any of these be self-sufficient simply with the re service revenues that would be generated and cover the investment required plus the any death Service as well okay so let's kind of Dive In this is not Mar all right okay so let's start with dark fiber so this is scenario 18 and we'll show you where we're getting these numbers from when we go through the research that'll be in a little bit um but this is what we think the pricing structure looks like it's very simple with dark fiber um it is distant sensitive um and so there are not too many dimensions to the pricing here and this is pretty industry standard but typically there's usually a differential in price between a private and public and user that's leing that do fi and and then there's typically and the price of the initial Strand and then initial additional strands are typically discounted somewhat um because there're shared ownership uh the maintenance cost for that would be shared as well uh but these are the price points that we believe are realistic in this Urban environment um they can look very different Market to Market they look very different in rural areas but we think in your case is an Urban Market this is what we're looking at in terms of price structure that per per year per week per $300 per per month month per strand per month and then you'll have increments uh you know 1.4 miles

any per point4 yeah is throughput not considered just Geographic distance because it's dark it's just fiber you're just getting a strand yep so it's up to whoever's leasing that to decide what Electronics they want to put on each end and that's going to ultimately determine um now let's move to least fiber so this is lit this is scenario be and this is the pricing structure here so higher price points because you're investing more so you would now be paying for the electronics and so this kind of the first one really would be as I mentioned more applicable to another internet service provider this would really be more applicable to a large commer account that wants you know dedicated high capacity VI and when I say dedicated that means if they lease five G of capacity gig is dedicated to them we talked about like your your residential internet connection you have in your home that's shared capacity so if you get 1.2 gig from Comcast you're sharing that with your neighbors this is different where you get all that capacity available and dedicated to you all the time um so here again a little bit of a differential between the end user type of private versus public there are typically it's just industry standard that there are discounts on longer term contracts um but again it's it's pretty straight forward now let's talk about scenario two which would be that last Mount so now we're going to talk about residential services and to do that properly let's just quickly look at

what's in the market today here in Bellingham so let's start with the incumbents so the typical Telco and cableco players so we've got Central Link here which now I guess and then we got Comcast um I won't go into a lot of detail on on a few of these slides Comcast is you're going to see when we go through the residential market research has the majority market share this is really the one we need to be looking at terms of what they're doing now some of these other players they have Sun fiber out there spotty availability and you'll see that even more on the next slide with the alternative providers just the incumbents but Comcast is fully deployed what's called docus 3.1 and that's an enhancement to their hybrid fiber coax offering which allows them to oper 1.2 get down they're restricted in the Upstream to about 35 megar so um but this has capacity through that upgrade um and do 3.1 has been around for about five years or six years now um so they've got that fully deployed they can offer a gig it's pricey though so if you look at you know typical table company you know there's different pricing depending on who you are um and it goes up over time but they do have a data cap and so if you want one gig and you want no data cap and you're off that initial promotional rate you're at $143 so um now we don't know what percent are actually paying that 143 but you know it is something that it's available but is expensive and what you'll see when we get to the research is that

there's this theme of value um and the need for better value so there's definitely among Bellingham households a need for more value for Internet service and I think this is part of the reason why then we have and Quantum fiber is just the brand for when Central Link or does fiber um so that's kind of repeat and we have four other providers here that are alternative that are doing some amount of fiber um not available in all areas would be a huge disclaimer on most of this um and then there's a mix of DSL fiber and then down here what's called fixed Wireless um and not a lot of market share here as you're going to see so it's informative but in terms of setting your strategy like I said you need to be looking at compass um and then we have the commercial uh incom fincial Market centr comp again so we know these price points these are really here to guide us in terms of you know making a price recommendation so that when we characterize a revenue stream go fora we're talking about realistic price points and so in terms of what we would see this as um and these are pretty common within Municipal Broadband for those cities and towns that have built out last month but we would see a one gig symmetrical offering about $70 a month and then go yeah a question on sure hi this is Mayor lend just a quick question on whether um in those service providers the upload and downloads that you listed are those theoretical have we tested those I think a lot of the citizen experience indicates

that that might be more in the theoretical versus what a lot of residents are actually achieving at home right yeah good question we did test that um so in the survey that we did with the residential segment we actually did a speed test and then we also asked people if they felt like they were getting the speed uh that they were subscribing to so we've seen markets where that has what you said where it's kind of over promised and under delivered we have seen that examples of that we did not see that in your case so generally speaking at least among Comcast subscribers as I mentioned they have the majority of the market share um they are delivering the advertise feeds but I'll show you the actual survey results to those questions in a minute thank you welcome okay so but this is and then you can go above a gig um and and municipals are St there are Municipal Broadband operators that are operating 10 gig today that are out there um these are price points that we tested in research um and we looked at demand above a gig and there is demand above a gig here in Bellingham at these price points um so we'll talk about that when we get to the research but this is what's in the proforma in terms of a revenue stream for scenario 2 what does this mean in terms of value uh we like to look at Value as price per Meg that you get on the downstream um and if you do that with the incumbent so Comcast and and Century Link is here uh Comcast at 1.2 you're at 12 cents of May uh what we would

propose here in the pricing that we just looked at on a previous side slide you start at 7 cents and go down to 4 cents a May so better value and then on the commercial side and again this is just standard Internet it's not the stuff we talked about before it's just regular internet for a small business we're looking at this here higher price points common industry standard um so it's it's more than residential and then this next task we asked to look at operational resources and that's part of building a good Pro Form up um and most of this is going to be about Staffing and and what's required for each of these three scenarios and then we'll talk a little bit about some additional resources required like software and things that you're not using today that would be required if you did proceed with these strategies um so this is a typical Broadband organizational structure uh in terms of the functional aspects of of what's required um so you have kind of the network Administration aspect and typically tsrs are technical service reps help desk if you will um you have your field through so that can break out across install Texs that do customer installs maintenance tchs that maintain the network upgrade it deal with outages splice repairs and then service Tex so if a household has a problem you need to roll a truck to go fix it that's these guys here then you have some account sales people customer service reps that do the billing answer questions uh make the sales and and

create the work ERS and then you usually have some marketing functions as well um and then typically you know we're going to talk about there can be some Outsource customer installs and that's simply because as you launch you have so much activity for that those initial period of time you probably don't want a fulltime hire for all of that activity and so you do a blend of your own text with Outsource text um if we look at the three scenarios this is the head count that we see being required for each of the three now obviously scenario 1 a and 1B are pretty light duty they're less involved for the city than the second scenario Last Mile um so with dark fiber you need someone to sell it you need a network design engineer you need a couple maintenance tchs um and so you're looking at four total full-time equivalent dedicated to that operation um if we talk about least access now we're offering with service called infrastructure manager would be added in the picture here and then the other same for people for a total of buy right um when it's lit we just need a little more support to the management perspective and then if we look at scenario two which is that last mile um system general manager marketing commercial accounts data text um You probably contract Network design customer service super or CSR TSR install text all the texts here so about left last M and then I won't go into all the detail but we do have in our report and in the plan basically what people do so just a

definition on these rules and why they're important necessary um so I'll just kind of briefly F through these but this would be the middle mile position details so this covers scario 1 a and 1B and then for Last Mile you can see the see as well and then we have as you would expect um included the compensation with the the city's uh salary benefits loading percentages in the proor so we have all of that and so when I go through the financial results those are all embedded into each of the scenarios okay um and then this just gets into how we handle it with modeling I I won't go into all this is pretty dry stuff but we have intelligence in the model to understand what activity levels are going to be required both for installs service calls um just phone calls with to the help desk all of that based on discount of that and then we even have of staing this is just how you handle trouble call that this is a piece there there is a need to purchase some more software depending on which scenario you go with so um these are kind of the three typical um EMS you have this today um that might report an upgrade fber management software using the one that would definitely be needed would be OSS PSS operation support system the support system and especially if you did scenario two in Last Mile that would be required and so we had budgeted that one and this just talks about why you need that but you need it all right then Neil I think you you're on this one right day before you go y um you

gave us three models to Middle mile L and dark and then a Last Mile strategy um the language in in kind of the charter that was sent to the Broadband Advisory workg Group had to do with um look for ways to increase community's affordability availability equitability of access to quality of services yeah did you rank or or or rate those three models on their ability to deliver on those Community goals are they all equally the same in terms of delivering affordability or availability or equitability of access or is they're not the same okay so that's kind of important to know but if one gets you like 90% of the way there for on Tenth the cost it may be better than the one that get you 100% of the way there for you know more cost so it's it's it's not just cost it's benefit and so later on or at some point will you talk about the benefit in terms of those Community goals yeah I will and and if I don't bring it up just remind me because that there is a difference there certainly y so uh part of our scope was to look at resources to support upgrades um identify resources to enhance infrastructure so just real quick uh the impact of other construction projects on the plan routes for Broadband uh we're calling for minimal construction as it relates to opening up a street putting in conduits and things like that these are all very sight specific um that uh aren't going to involve a lot of Destruction uh Beyond people walking on the sidewalk Street Court um so and and we we do

recommend that the city continue to focus on placing spare conduits in any any Street or water project um as it relates to the level of contractor involvement throughout the upgrade process uh initial outside plant design and Technical Services dis splicing um that is covered in the Staffing plan and the different uh models that Dave talked about in terms of one two and 1 a 1B two um we do recommend that uh that the city should contract with an outside Planet construction firm sale or someone else to complete the Vault upgrades there's a lot of these upgrades need to be done uh you don't want these to linger you want once they start want them to be uh finished to completion so that you don't have holes open to the ground which obviously that's how you would operate here anyway um and we would recommend that uh John and his team uh manage that manage those Vault upgrades okay so they would serve as the project manager in terms of you know don't hire a contractor to do that um and then the material requirements there's no there's no Special Sauce in the materials that you need for for these upgrades um all of them should be available within standard delivery Windows albe it they're going to cost more money these days price keep have enough um all the b in handholes uh are referenced as an existing wash dot specification and there's no specialized assemblies or devices so there's no there's nothing exotic about any of this it's just root Force replace these bols there's no

specialized perit processes like what I was like what I was mentioning earlier you're going to go to where this Vault location is you're going to uh protect the site remove the VA fall and then uh hopefully do it all in one day and then affect the uh art surface restoration within a couple days you're should be done um and then in terms of the project deployment strategy the backgr back backbone upgrade effort should be prioritized from the center out so we talked about the the primary ring that should be your focus um and then the upgrade should be completed on a route by Route basis so within within GIS we've characterized each uh fiber segment according to what route it's part of and what we've learned from our deployments is don't don't go all over the place Focus finish certify and move to the next one so that so that the entire route that that cable is in is done you have to come back and touch it again um we would recommend that you issue an RFP for otdr testing and Analysis first um and then issue an RFP for up to 845 Vault upgrades and then that'll that'll give you the opportunity to to parallel these two things so that you aren't waiting for the results of the otdr testing to pick your provide bird contractor to do the Vault upgrades um and then of course hold the fiber installation in the southwest route till that's completely upgraded and 12 to 24 months I I wrote this a long time ago I would say uh 24 months is is pretty aggressive but it could be done on

contractors okay ready Dave all right so for task five want to talk about underserved and and we looked at this two different ways um it's unserved or underserved and there's the FCC definition of it um which a lot of people don't like including us because their definition is if you offer 100 Meg Downstream you're fully serve for Broadband um and that's just how it is um but the other way we looked at it is aside from how the secc sees how do consumers see or what's their opinion of whether or not they feel they're being fully served for broadband and that's where the research will come in so uh but to start with that let's first look at the grant funding situation um so this one involves the money part right so there are a number of programs out there um the first one was arpa um this one's a little bit older I'll talk next about B that's the major $42 billion National level Broadband infrastructure grant program our was a little different because it was covered infrastructure in general it could involve Broadband if a city or county decided to use that money that way but it also involved other infrastructure like water Etc and most of the clients that we talk to in getting any kind of arpa funds uh when that route is supposed to broadband I think there's some Broadband arpa activity but most uh communities waited to to use bead because bead was only for Broadband um the one thing these programs there's a third one called reconnect the one thing they all have in common is

you have to meet that FCC definition of being underserved or unserved um and so that runs through them but this kind of gives you kind of the high Lev details on these programs here's arpa um and so you know here's some definitions on on what's required um and then if you go to B which is the one that's kind of happening now if you will um and there's the 42 go in but the eligible use that must Target under underserved areas where 80% or more of households do not have access to a minimum of 100 Meg um and with compest here at doxis 3.1 it just it takes you out the game so this money is not available in your case this is mainly being pursued at the county level in some pretty rural areas and it's still a challenge there's still a match requirement um and you have to have an SP partner if you're a municipal and so it's not an easy program to get through uh even if you do qualify but it's it's a nonstarter here in your case um and then there's reconnect as well but you know same same restriction there so that problem is throughout all of these Federal level Grant programs um this is the FCC National Broadband map so this this dictates whether or not you are considered served or under or unserved in your case um every single area within the city limits is considered served um so we don't have access there's other ways to finance these things um we've been doing this a long time we have a number of clients that that find other ways to finance these projects so it doesn't include

it but it it's not going to be available in terms of Grant um so let's now shift gears and not worry about the FCC and let's just look at what the market thinks so this will be the residential survey that we did so I'll talk you through this and we're going to cover a number of topics here um to get a feel for what residents think um and probably the the main conclusion out of this survey is to get a good understanding to what potential demand would be so that we have the right AC rate input in P form when we look at scenario two so this is how we structured the survey a number of FBS were involved besides us we're kind of involved front at the tail end um but in between we rely on partners that are market research experts to feel the work design the survey Etc and do the programming you can see who those are here um in terms of the design uh we did both phone and an online survey uh we had 395 phone completes and we had a little over 1100 online completes um so total sample of, 1500 pretty large um out of the universe about 39,000 homes that gives us a plus or minus 2.5% sample error at a 95% comp go um and then what we do is we use H quotas uh to ensure that we get sample in all H categories and then we wait the data back to the universe based on age to accurately fund that um for remove bias we do these things here so inir we're talking to the decision maker weid City Limits and then we screen based on employment bias as well in terms of the demographics you can see income

here um so little bit underweighted on lower income we always see that we had about 8% refuse to state income that's actually pretty low um but not too bad in things of the the sample you know capturing more or less the the actual distribution households for income within the city and then on age um this is the census in green the raw s in red um always under sample on younger households but then we wait it back so the orange matches the green um and that corrects that so excuse me Dave yes so you have done other municipalities right and that you have models already yes right for that so my question here is when when you're talking about the income and then you're talking about charging somebody x amount what is the correlationship between their income versus what you think they should be charged well yeah it what I would say is what I think they're spending so I'll show you how income affects what households are spending on broadband and you know as you're fully aware they have lots of options in different tiers and different speeds we saw all the tiers that Comcast offers for example and they'll the income of that hous will influence which tier they subscribe to so we'll we'll see see that in a minute thank you um so this is what going on today so let's start with kind of what our households doing now and then we'll talk about satisfaction we've into some other topics um so 98% of households subscribe to the internet service at home 86% are doing that through a wire

connection which is the gold standard um so if you look over here uh this is the incidence of Internet households we have 2% that are not using internet 86% have the word connection and then we've got a small blend of satellite home internet home internet is for example Ryon or T-Mobile it's a combo with your cellular plan you pay about 30 bucks extra and you get you know 100 m or up to 300 M um and then we've got fixed Wireless of those that don't subscribe to internet this is the reason why so it's kind of a blend between um it's too expensive they don't need it um for some other reason but again that's 2% off so and then if we look at the 98% and look at market share Comcast T 34s the market share um followed by Century Link as you expect um but you know pretty low in terms of 14% for being an incumbent and then you can see all these other players um just have slices of market share in the residential market now a lot of these players are in the market more for the commercial side so keep that in mind but it's really about comast in terms of understanding what's happening market and then if we look at any influence on demographics so if we look at age and income there's some influence that remains this has really changed a lot we've done 47 of these surveys now going back to 2003 um and this has changed a lot in terms of Internet becoming you know like a utility it's just a needed um service in the home so you don't see too much variation like you used to but there's some

um so below 50,000 in income you see a little bit less of wired internet connection that's the orange and then these other connection types are are down here um and then the other thing we see when we look at age um is we see that older households are a little less likely to have a wired inter your connection um but again not not major demographic you know changes across incom in age when you look at this and I think it's just because they're in so de we asked about stated spending um that average is about $70 a month across all households um so right that price point that we have for one big um and you can see spending by income and you can see here lower income tends to be spending less this this is less than $25 the red is $25 to 50 we asked about now we talk about speed this is the stated download speed that they're subscribing to and we always have a fair amount of households that don't know in your case it's 20% seeing up to 30% or so um but they're not sure what speed is being subscribed to um but in your Market 43% of households State they subscribe to creative in night um we've got 15% here saying a g and 2% saying a greater than one gig which can be correct because Comcast offer is 1.2 gig um here's what's interesting gets back to your question so this is internet access spend by income um and or speed excuse me speed um so this is income here this is up to 25,000 annual income here's 25 to 50 and you can see here this is 25 May the blue here is 50 May so there's

there's much less subscription to these higher speeds like the here among these lower inome households so and we see that when we ask about it as well but it's also in the objective data we asked about their perception of receive versus subscribe speed and there's a little bit of a mix here and some of these will not be Comcast households for example um but 55% of households strongly agree or somewhat agree they're receiving the advertised download speed okay and a few of these charts I'm going to split the same sample between the total sample and those that stated they would definitely subscribe it gives you a little bit of additional insight into your target market if you were to pursue this scenario to and you see some shifts here um so a little less agreement among those that that definitely subscribe as you would expect um and then we've got you know some this is at what 34% um stating that they you know about one and three feel they somewhat or strongly disagree that they're getting spe that they subscribe to so there is some of this in the market then we did the speed test so we had um we had 928 of the uly 1500 survey participants perform speed test they had to be at home to be taking the test um but we did this both in the phone and the online um and these are the results that we got um so this is the number of observations by download speed here and then we identified the median download speed is about 122 Meg median upload is about 12 and then we oh yes okay could

could you clarify if these were browser based download uh speed tests yeah they went to speed test.net is that is that your question thank you okay so here this is where we're comparing the the stated speed to the observe so we just pull all we can't do this at the individual level unfortunately that'd be great but if we pull all the stated speed in the survey question where we asked that and then we look at all the stated the observed results from the speed test you compare them this is what we see so at a macro level and it's not perfect science uh because there is separation between these two because it's not each household but we see that here at the low speeds below 50 m there is um you know more observation of lower speeds than a stat so here these households at this level are probably not getting what they think they're subscribing to in terms of actual speed when you get to 100 Meg and beond that changes and we see that they are generally speaking seeming to get what they're uh subscribing to so there's kind of two things going on here one is the speed test results and the map and the others perception and so we saw from that first slide we've got about one and three they're percep ction is they're not quite getting what they're supposed to and then when we look at this we still see the same issue but we really see it concentrated down here in lower speeds um we've done this research in other markets involving other service providers as the cable company and we have

seen issues here um and so we're not seeing that in your case but we have seen that in otheres and then we conclude with uh by asking how does the download speed test result compar with the download speed you are subscribing to from youro provider um we got 9% saying it's higher 50% saying the test was lower than they thought and 177% saying 25% all right satisfaction and then we're going to talk about attributes as well um so satisfaction this is the ranking of these different attributes of the household internet Serv service price support speed consistency available speed reliability and then overall on a scale of 1 to 10 so overall satisfaction 5.7 on the scale me Tech um and as you can see price is the lowest and you're going to see this recurring theme of not getting enough value without a number of these questions U but these Benchmark what we've typically see as quite wellow um so you know 5.7 on scale 1 to 10 um typically seeing in the mid6 to 7 range um so there seems to be less satisfaction with internet service is basically Comcast well Comcast has 77% market share so yeah we're talking to a lot of concast customers here yes um and I I could cross tab that isolate that out too yeah this is a little off topic from the survey but uh during the work group you know a big concern about offering retail Broadband was the not just the expense but the overall challenge of adding the Personnel to provide customer service and other everything else associated with it um with

prior Municipal clients that you've had what you know after they've implemented a plan how can you speak at all to like their citizen satisfaction with the city's quality of service like is this easy for cities to do or is it actually really hard I wouldn't say it's easy uh We've we've done eight implementations with clients um so we've been through that with them um it's a lot of work and the startup period is typically a year and a half to three years um and but you know they're able to hire the people with the skill sets um and make it work and we've had some really small our first deployment was Sals Oklahoma 3,000 households they had a small team um and they're still going strong today and and it's cash flowing um so it's a lot of work but doable it's doable and and luckily now when we started was in a pre- standards environment for fiber the home uh we didn't even have the B Pond standard and then standards started emerging and then when that happens and now we have the gpon standard and xgs pond that that enables the vendor Community to build the software and other tools around those stat standards and that really makes functional aspect of what employees need to do a lot easier and so when I talked about that OSS BSS that's a key example that software now integrates with all the electronics vendors whether it's CX or adran and makes life a lot easier for employees to run on a day-to-day basis a system like this so it's it's doable but it's it's not easy um okay so in

terms of attribute importance um we ask to rank um on a 1 to five scale reliability came in as most important and then here we've got price and speed which together is value um and so again that that's coming through uh brand service bundling this you know 10 years ago everyone was worried about G have to offer triple play anymore able TV is kind of falling apart due to streaming so so this is how this looks and then in terms of areas for improvement um what would you like to see most improve with your current Broadband these are the options here uh we had 2% say nothing um so again lower price and increased speed and then the Orange is the debt we subscrib uh segment if you will and then we've got getting speed pa4 so overall that was 15% within those have definitely subscribed that came in um and we look at that by age there is a little bit of a difference of demographic effect here where speed is more important for younger households and pricey is more important for older households um in terms of Ideal download speed total sample um we had 49% so one and two state that their ideal speed would be a gigger Hider and then if we slice that again to the red only we definitely subscribe that goes up to 69% as you all know upload speed has gotten a lot more important 10 years ago that was not the case households did not really understand or place value on upload scen but they get it um digital applications even post pandemic um this is the still the social um and entertainment

aspects of are still most important but you do have working at home coming up here and other examples that that have been influenced from the pandemic okay affordability um so we'll get into some of this stuff now um so 48 so basically one and two households strongly agree or someone agree that they are subscribing to a lower internet tier in order to save money okay so again that's perception and there is a program out there I'm not going to go into detail on this this is we've been working on this 10 months the ACP program pable connectivity program funding is running out they may save it in Congress we don't know yet um so it's a little hard to kind of state where that's going there is some use of that in the market today um 10% of household state they're receiving some kind of subsidized internet so that can be through ACP the incumbents even before ACP which offers a $30 discount we're doing an affordable program as well like internet for 10 bucks if you qualified by participating in the national school lunch program something like that so so this is out there to just know that's on the radar um and then we'll talk a little bit more about affordability okay and then there's provider preference and then we'll start talking about purges intent so we asked uh among the following list of potential providers who would you prefer to receive your internet from um so total sample 46% said the city um you can see 20% said they don't know 177% Comcast and then as expected if you

only look at those stated they would definitely subscribe that that J is we have been in other markets and done research where we' seen opposite of this um so it's not super common but we have seen greater preference for a Comcast versus the city and some markets would have done survey work we go back to that yeah I guess I'm kind of surprised um that people are that interested they actually a state of preference for getting service from the city because the city has never provided it they be they' be jumping into an unknown but that unknown seems preferable to that yeah it's trust you do provide service to them you don't provide Broadband so we get water might as well get that too and I know what Comcast gives me and it doesn't feel good yeah I think they know that your motive is is different from private sector in comment and there's just a certain level of local trust that's been built over time you don't have any political persuasion breakdown in this data set to you like the Govern right people don't like the government well I could you know like I said I've seen scenarios where this is reversed but I've seen a lot of this pattern in other markets we've done a lot of these surveys so um I don't think it's political I think I think it's simply a level of local trust and so if you're you're doing a good job in what you do even if it's not related to broadband at all I think that good willll carries over when you talk about brand preference and it's it's it's a consumer

Market this is very emotional it's you know no one's thinking well they Haven done this would they be able to do it that comes up in our depth interview discussions and I'll go through that but I don't think it really comes up here um so these are price points we tested um you saw this um but these went into the survey um and then here's the purchase in 10 questions so um we asked you know at a $70 price for one gig and that was in the question uh How likely would you be subscribe to internet service when you c um and this is called a fiveo ler scale so the options are definitely would probably would might might not probably would not definitely would not I don't know it's symmetrical and these are the raw responses uh that we got so 41% said they definitely would 25% said they probably would and then 16% so we've got 2third of survey participants saying they definitely or probably need switch or a gig from the city at $70 a month and the reason um prefer the city and you know more capacity lower price prefer the city these ratios change a little bit this is a little bit stronger in your case than I typically see um but again go back to that satisfaction slide and you know the low scor is there you know 5.7 out of 10 Yeah just something in our um political climate uh less Corporation more local jobs profit stay local um reinvest in infrastructure I've had conversations with quite a few people I work at a community college so I see the full age spans and this has been a

conversation for the last few years okay um for me I'm just asking people so there is this anti-corporation the money exits the community create jobs here have the money stay here so I think a certain percentage could possibly be that idea ology or hope that the jobs stay here yeah and the money gets reinvested and any profit goes back into the system because we're not into making sharehold the profits so um trust yes but a big part of that is keep the money in the community yeah yep fair enough yeah and it shows up um so strong purchase intent now what we do um we we like to be conservative when we get into Pro modeling and financial modeling because these tend to be expensive projects with some Financial Risk and you don't want to be wrong and so we do what we call overstatement adjustment and apply that to that purchase intent response that we just saw so we'll take 70% of the defly would uh intent we'll take 30% the probably wood and 10% of M and when we do that and this this comes out of package Goods I think it was Proctor and Gamble you know decades ago in just do doing research on like a new laundry detergent and they go test it and then when they go get it on the grocery store shelf um they'd see a different diluted response and it's just people act differently when they have to take out their wallet versus answering question on a phone survey and that's why it's called overstatement adjustment and so here if we do that it's 38% tape rate when we apply those

adjustments to state to make and that's still strong take great yeah I just want to point out that according to my recollection the final study from mellan advisers that we put out with the work group was that uh we wouldn't we would need at least a 35% take rate for any project to be financially viable and based on their survey they didn't well I think it was I don't know if it was the phone survey or just the strong Market competition they didn't think 35% was likely to to be reached but um and something else here yeah I I would defend this I think I think that you can hit this um and because we've done like you know like I said with the new this a long time and so we've had clients where we're very fortunate where we've we've been in this place now with you guys we've done the surveys we have an estimate and years later they they deploy it build it and they hit the number and then they exceed it um you know long Mon's one of our deployment clients they they're just under 60% take rate they overbuilt Comcast um so they got in a little before Comcast deployed docus 3.1 so that certainly helped and they ran a special when they launched where if within 90 days of having service available to your home if you subscribed in that initial window you got charter member discount where it's $50 for a gig for life and so that boosted their results but they beat our estimate because they ran that special so but we've consistently seen an ability to deliver this on the data side so I

feel very confid that number from the demand side there's still other issues that we'll talk about but what's the risk of building a system that need current con yeah you have to do that so we've included and I'll show you when we get there on the capital forecast we've included Network upgrades in year seven and year 10 upgrade both the what's the fiber modem it's called no opal Network terminal as well as all the electronics in the network and so because you do have to keep investing over time fiber is good but the electronics you know the vendors keep improving add capacity all right so um and then as I mentioned we looked at those other 2 gig and 4 gig offering as well and this is a common pattern and it's I think surprising to some people but we had 75% say they would select a gig at 70 we had 21% say two gig at 110 and 4% take 4 G50 a month um and there typically tends to be 20 to 25% of the residential Market that will be interested in that upgrade if if this price jump is reasonable you know if you go to 200 or 300 here that's not going to happen so um the key is to is to kind of that elasticity of demand but there there are households that want the best you know for $40 more um so that g that by the way that gives us a an average revenue for it's not 70 because of this you get up to about 81 on average um if we Benchmark this purchase intent this is what it looks like going back over a long period of time uh we do we've been in some very real markets uh this is a

market where there was only Century length there was no Comcast there whatsoever um and so we've been in some pretty small rural markets where we see a little bit higher purchase intent but this is you right here um overall pretty strong and then here we're just going so far back that you know there wasn't as much uh demand or understand we did look at neighborhoods as well so um we identified which neighborhood the respondent lived in just got a couple slides on that um we had neighborhoods where we had sufficient sample size at least 50 and then we had neighborhoods that were smaller we had to do some combining to get them to a sample size of 50 and this is just to you know keep some validity to the data and and what we're reading out to you um and when we do that so this is that list so here's all the Belling hands here terms of incidents of wired internet so here we're looking for undur right just kind of seeing in terms of what people are doing versus what the FCC says and we see for example these five with the the lowest amount of subscription to wired internet and wondering what's going on there but this is how they lay out in terms of looking at that Dimension and then if we see what's going on and dig deeper in those five you can see um for example in cordada Meridian um there's a lot of home internet there you can see it right here in the purple um the green is satellite and the red is fixed Wireless so they're just going to Alternative forms I'm not sure why that

is um but that's what's going on in terms of what people are subscribing you didn't ask you didn't ask that question why why are you looking at Satellite versus no we did not why yep no could be Tesla's new thing could so sorry what does home internet mean home internet is it's an add-on like T-Mobile and Verizon if you you have to have a seller subcription they will do it for like 30 bucks a month can I ask a question for those lower ones did you happen to look at the demographics because I noticed one of the slides that the income of over 150,000 there was a bit of a drop then also with the age there was a bit of a drop yeah knowing some of these areas they might fall in not not all but a percentage in those demographics and so I'm kind of wondering if that might be a little bit of a causation for the lower it probably would be so if if you know it's nothing's perfect but like you're saying if there's a greater chance there's lower income here as we saw before that could be influencing what's going for older and higher income was one of the the two right some of that is lower and but definitely some of it is older and higher income right yeah and you know if you're everyone has cellular yeah and so if you're a lower income household you might and you have sell already you might look at home internet and say you know I don't want to spend $70 on top of my cell phone bill I'll just spend another 30 so yeah exactly um and then we looked at purchase intent um and one of them

falls out King Mountain Falls out but the other four are above the average or not above your average overall uh purchase intent saying they definitely subscribe so that was 41% say definitely subscribe for all the going up you can see the scores here in these other neighborhoods all right I won't go through the summ because we kind of covered everything here all right now let's shift back to scenario one a and 1 B one aing in there okay um so we did research here as well um these are called depth interviews but they can be very insightful very important for understanding what kind of uh Revenue stream is possible for either dark fiber or at least access um and what we're really talking about here is this this is kind of the range of data services this is standard internet um so that looks a lot like residential like I showed you but with higher price points we're really talking about people that are entities institutions and larger business businesses that want direct fiber access they need the am to be dedicated solely to them they want to have a service level agreement they want to have credit if there's an outage via that service level agreement and they want to have escalated support and be treated you know as VIP um and this is out there and this is what you know some of these other alternate players like zly and Astound are doing um in the market here and then there's point-to-point transport and this would be more like atic fiber um but we're really going to be looking

at number two here this is what they need they have to have fiber dedicated passy they care about pricing uh they want redundancy and what's called protection so they don't want it to go out uh they expect great customer service um and this is who's doing it today some of this is leasing some of this stuff here but these are the players that are out there that you run into when you go talk to these larger commercial accounts this is what we did we had eight interviews we had five of the eight were leasing transport and then we had some others that were kind of experts and and good at giving us some insight and I'll show you that list um of the five that are leasing all five gave us Market details which is really nice sometimes they refuse so that was that was excellent we have 100% participation transparency um and then we were looking really at Key things is fiber available do they use Fiber um what the current price levels um you know anything else that's coming up in terms of what they're using or what they need and then from that we're able to estimate market share and understanding pricing these this is who participating there's the five up top and then these local experts here Dr pug CSS and then Bellingham Public Schools they're they're one of the co-owners to F back B and then before we jump into results just to jump out to the National level real quick this is what's going on with fiber 2 commercial buildings so the red here is any building that has 20 or more

employees going back to 2004 and you can see how this Market has really exploded and a lot of it these alternative providers but also the incumbents deploying more fiber and pushing fiber all the way you know Comcast their last mile system is still coax they can do docas 3.1 over it but if you're a big commercial account and you want eia service they they'll build fiber to you or Cent go um so it's gone a dramatically and in your case um so this takes all five and looks at various dimensions of the opportunity or La thereof and so let's start at the top all five had fiber available all five were connected with Fi already by at least one provider three of the five had redundancy so they were leasing capacity infrastructure in such a way that if one of those C Le circuits failed they would still be in business none of them had unmet needs the capacity utilization on what they leasing ranged from 10 to 60% that's low so no one's at like 70 80% um they've got room to spare with what they're leasing today uh four stated they were under contract one refuse to answer um I think it's safe to assume all th are under contract um I asked if they would report an SLA because that's a little bit of concern with the state of the network here you know Neil talked about some of the issues and being ready for this you would to go after this Market you would have to offer Ana and that stands for service level agreement it just means that you will guarantee certain amount of uptime a certain

amount was latency and you'll put that in writing in the contract and if you don't meet it you got to give you money back um and so this is out there as well so this is kind of a necessary ingredient to play in this space now will they conserve a city all of them will now you look up here and why and here's the reason it's because these businesses love having protection and provider diversity route diversity and that just gives them more of a guarantee that they will always be up and their Network won't be down so this is a pretty common pattern you've got you've got more competition here in most markets that we've seen uh but this this situation here is fairly common you're not going to come in probably kick out who they're using today but you can come in and play along um as just a different opportunity and what really helps here is if you can establish physical route diversity so you're in a different trench or conduit whatever um that really helps with that but there's still is an opportunity with leas access your satisfaction scale of 1 to five looks a lot different uh the residential on scale 1 to 10 um and we've got almost the same scores as the residential on a scale that's half the mention um so here that's high satisfaction here pretty much across the board um these are the only ones where we had two or more uh participants using so these scores were all single value um but it's high people are satisfied and I I I would assign that to the degree of competition

that's here already in this particular segment in terms of selection criteria reliability 5.0 perfect score um and that's where the opportunity comes in of course and Then followed by redundancy and both those are related of course and liking local support as well um cost is down here these kind of commercial entities p is not the driver it's all this so if we look at this now we have to kind of start moving into okay what does this Revenue opportunity look like um if we talk about high capacity local market pricing um this is what we were seeing in these interviews and this is what drives what I showed you you know an hour ago in terms of what the proposed pricing would be for least access so a gig about a th000 recurring you're at about a dollar a me You' go up to 10 gig $2,000 now you're down to 20 cents right up at 40 gig you're down to 10 cents a pretty consistent in terms of you know we only had five but you can see a definite pattern there and then in terms of dark fiber releasing this is the feedback we're getting there as well and the P was very helpful with this we've seen this in other markets too we did ask about the motivation so we kind of wanted to ask about like the level of support among these commercial entities that participated um and we we offer these three reasons as potential drivers for why the city might consider something like this and resoundingly you know implementing new technology to enhance Economic Development was the thing that resonated most

with these um we just did all the details I'll Swit to summary okay task six financial analysis um so we're getting there now um so these are the types of non-grant funding strategies that we've seen over time um and there are a number of different things you can do uh by far in a way the most popular one is is combination of one and two usually which would be a long-term Bond General appliation Bond Revenue Bond um supplemented with a working capital loan so if this bond is solely dedicated capital investment you do have some initial operating losses typical first three years or so and the working capital loan would separately be financing those those operating losses until you build up enough Revenue to be positive have positive operating cash flow um so in terms of what we've got in there we're going to show you one and two here we're using a go Bond at 4.5% interest 1.5 issuance cost we capitalize interest for the first couple of years and then a sar with the working capital loan but that's a shorter Term Loan with a balloon payment um if you do wholesale you can get Revenue through the wholesale fees we've had clients use equity um Hillsburg is using some Equity Beverly Hills is 100% Equity um that's an option I did look at that I can show you what that looks like in your case um this is a little more Uncommon but you can do a local improvement district or a special improvement district um we kind of at a neighborhood level you have the neighborhood registered and decide

if they want to participate um and that creates a funding screen it just slows down the build um but you basically add a monthly assessment to each household um and then there's some examples out there kind of paired with lids usually where the customer thoughts the installation but we're really going to be focusing on these two and then showing you what this looks like Okay so let's start with SOS 18 and um as we go through these uh just a couple thoughts on to get grounded with you on what do we look for when we look at the financial results and it's really these four things um that we're going to look at these two are about time frame so this is time frame to get to positive operating income sort of important um net payback more important so this is the time frame it takes for the project to earn back the the proceeds to pay for the initial investment we' like to see less than 20 years um and that's long but this is you know long-term infrastructure we're talking about number three is the most important one in our opinion and that is that once you finance at whatever financing structure you deploy initially that you never have to go back again and go borrow more so you do sufficient funding upfront so it allows this Enterprise to build up the revenue stream in the operating cash flow to finance itself perpetually after that initial round of funding okay so that one's critical and then we'll just do sensitivity analys this is a little more um I wouldn't say qualitative but

it's a little secondary in that we can do things to model if something goes wrong is it still stable you know how how sensitive is the case to you know something not going as plain okay so with dark F releasing the market opportunity um and I said this is this is not an easy exercise um because it's competitive and we're talking about you know one account can make a big big difference difference um but in terms of the opportunity here it comes down to how many strand miles you have available to lease that's 219 miles route miles like fber plant and then the Strand miles uh there's obviously multiple strands in that route that tot strand 300 but the real opportunity here is this number simply because you have an ISP customer on this they're in these two sand from here to here they don't need to at least 15 16 fibers from and so we think that this would be the least strand miles um here and we this we think this is likely I don't think it's too conservative I don't think it's uh you know too optimistic um but you know we think that this would be a realistic given year situation and this would require the improvements that Neil talked about you'd have to work through the service level agreement issue and be comfortable with that um but if all that fell into place um this is kind of what we think you'd be looking at now if we look then at that case and then we've added the forehead count showed you the forehead count so that's in there as well that's Opex we got the capex that

Neil talked about and then we got the revenue we just showed you um this is the total operating income over that 20year time frame um so you never get to positive operating okay and that's a combination of um and this is before Debt Service so even with this Equity funded the problem is you you have too much expense happening uh mostly with Staffing to to cover the revenue up um and I think in part you're you're you're kind of late to the game I mean you know you're a late entrance there other players that we just talked about they're doing this today um you know this would be a tough space to play in and again this is that dark fiber you're really relying on these internet service providers to need you and they're they're in there today and making it work somehow so got to be careful with this one in terms of Revenue okay so what would happen if you did this because we not operating cash flow positive you could do a bond get supplement with the working capital loan you get to year six and that operating income is not strong enough to cover the debt service requirement that is in play at that point in time because it goes up over time so you've got to go to another source uh let's call general fund transfers uh whatever you want to call it but there's got to be more money going into and you're never stabilizing this financially okay um then we get into least access so now we're in scenario 1B okay so this is lit more investment one extra person what matters here in part is

how close are we to the ring because to connect these it's great if someone's on the ring but no one ever really is so you have to build what's called a fiber lateral to connect that endurer commercial account to the fiber ring okay so there's incremental investment for each connection um but we can see where all these guys are so this is we used your your water database to identify commercial industrial institutional Etc these are the data points up here in green or blue or what have you but this is where all these targeted accounts live and we can see them on the proximity if the backbone only and then proximity of backbone incling the laterals and then that breaks down to look like this so we're talking about the number of entities by distance to the backbone less than 500 ft 1100 and then you go out here um and then it's a little bit better if you add in the laterals because that obviously shortens the distance in some cases and then you can see the construction cost here as well and this is aerial and there's underground obviously as you'd expect with substantial cost to make those connections so typically what happen is if you sign up an account like this and let's say it's $58,000 to do the construction we connecting typically it's hard to put all that up front on that account right you know they've got other choices so you have to advertise it across the life of the contract so you need enough Revenue in there to get that payb the construction cost um so that's

something to be aware of if we look at what we would use to Define the take rate um we would say that of all commercial entities we think about 10% would fall in this category of meing dedicated a in Access direct fiber connection you know willing to pay that thousand a month plus um and you know not a standard business that just needs regular any right so that would give us about 220 total institutions or entities as the market opportunity and then we would say started year one take r 2% going up to 20% by your eight um and again this would you know be that thing where you're the kind of the backup connection and all that so you know you will get take break here um but again it's it's a lot of investment to connect them CeX investment that Neil talked about to enhance and upgrade the BS and everything else um so there is capex that's that's involved so if you look at again cash flow before Debt Service um it's much better um but but we don't get all the way there um and eventually over time Staffing costs and increase here um start a road even further um but we're really not sufficiently cash flow can you explain those yeah year 10 and out why why does that get worse with time we're not increasing Revenue but we are increasing Outbacks and the reason why is we don't see these price points going up in time it's pretty competitive space for these pricing is going down not up but wages and salaries and benefits loadings go up okay so everything is getting cheaper except

Personnel yep your Revenue your your price points can't you can't it's not like cable TV you can't do rate increases every year with least access the market won't tolerate that okay after Debt Service yeah your six hits youve got it you can't you have to supplement it with other funding okay so those are the two middle mile scenarios um now there's scenario two which is the last mile I'll go through some of the high level assumptions on the revenue Opex capex go through all that um so this is what we're looking at here um this is bye and these are revenues the vast majority opportunities with residential internet um but we've also got commercial internet if you do this you you would do Lea access and then you have some install fees as well um but you have to kind of try lightly on install fees since you're asking everyone to switch so this is the market opportunity here so we've identified the number of presence premises the annual growth rate in each segment you said 10% of commercial is complex they're least access candidates your penetration we're using using 38% from the survey and 35% for commercial these are the price points we install these so you get up to 20 million in annual revenue it's strong demand I mean there's in these cases it's interesting sometimes you have the demand side and supply side demand side here it is strong like from that residential survey I think the supply side's the tricker question with the cost involved um and then we we have Opex and one

of the components of Opex is bandwidth so we've looked at that um there's a national Cooperative purchasing Cooperative you can get ban with extremely cheaply and so we've modeled that there is a membership fee we've included that all the details found here you would basically relase transport um to a data center um excuse me you have access to a data center now to your stuff you just need to subscribe to bandwith in the data center that you're already in so you just do that by doing a cross connect in the meet me room to the provider these guys right here um this was a comparative um so here these are two NCTC that's Cooperative $700 a month for 10 git bandet screen the deal uh the non NCTC comp only 600 versus 700 um so this can be very cost effective and then you've got some income LPS here you want to lease IP version fours no one likes the ver version six but those are only 26 29 cents each a mon so this looks really good in terms of cost structure no issues there but we would in being conservative even though bandwidth is tending to go down over time it's getting so cheap now that I think the drops are are going to be slower we actually are budgeting more per subscriber in cost over time because you because IP traffic is still going up 25% a year compounded annual growth rate and so that will need to increase over time if you're going to provide good service and good bandwith capacity to your subscribers so so we actually go up and you know we're spending you know about

a bu 20 per per sub versus starting out at about you know 50 cents or 60 um and then in terms of other operating expense we've got Staffing I'll go to that on the next slide um and here we've got the the head toal 4% wage increase in your case you've got about a 40% benefits loading overhead that needs to be added to the unloaded salaries and wages y expense Professional Services uh you've got some vendor maintenance as well that's about 55,000 marketing budget that settles in at 1% of revenues industry standard and then some billing costs as well but it's all about Staffing and it always is um and in terms of I guess see yeah we we looked at staff already because I gave you those numbers so um and then this is the capital budget here um I I'll uh so this is just what we have to do in terms of looking at outside plant with it's overhead or underground you saw the dramatic difference in cost um Make Ready costs when you're on the polls what is that going to involve to move uh assets around on the polls to make room for adding new fiber um and then you can see some of the key outside plan assumptions here etc etc okay and then you can see some of the composite costs down here so aerial $18 a foot underground $80 per foot so if if we roll all that up in that in terms of that unitary Capital budgeting um the average outside plant construction cost everything deposit is about 2300 for Ping that's to pass yeah I'm having some difficulty in figuring out the 15-year program that you

put together in terms of what what did you figure the inflation rate to be what did you figure the the megabits per sec megabits per second was going to go down but staff is going to go up 15 years from now is a really long time right um and so so I was just curious how did you plate that and what was your methodology to figure that well you're talking about bandwidth and so with bandwidth there's there's data and I'm also talking about inflation rates right that you've got to add into this yeah right Y and the staff costs and benefits and all that so I was wondering about your methodology was WR yeah okay yeah well well there's different that's not one for all um so we talk about bandwidth doing there is we're looking at the growth rate of Ip traffic and we're looking at what isps allocate for example we're using 3eg as the oversubscribed capacity allocated for residential connection and then that has to grow over time you can't leave it there and so that's what's driving the increased capacity that you go purchase and so if we go back to that slide that's the red bar here so this is 10 gig you hit 100 Gig 200 gig and that goes up over time and what's driving that is adding subscribers as customers and then secondly you have to allocate more to each subscriber every year because it's going up 25% annually so it's a huge driver and it can be an easy Miss in a pro fora when you're looking in this business so um so that's that's the driver behind that we're not putting

inflation in we we're basically looking at a cash View and so it's basically saying this is the price points uh we don't go up or down and we hold them there um but we do have to increase the the salary wage cost in this space it's not cable TV there are some players compest has done a couple rate increases I would be hesitant to recommend to any of our clients that you bake that into your performa I don't think that's wise um cost structure the cost of goods sold is going down I mean it's going a little bit up because you're allocating more but it's not like video Pro raming where an annual rate increases one so data typically has been a non-inflationary thing and usually the opposite of that especially in the commercial segment does that make sense okay um so if we go back here I stumbled through Capital um this is high this is you know Neil mentioned the numbers on uary cost so that that's that's quite High uh what was up C 1100 950 950 so we're in the middle of of doing a profil right now and that when 354 is $950 in that case um and that's you know it's just a the nature of the cost structure that's applicable here in your local market I'm sorry getting technical here for passing what a passing a passing is a premises so it's either a residential household uh or a business okay you're passing by the premises that's what you mean yeah and and that's important because basically you're in a position to connect them but you don't connect them until they subscribe so we have

to additionally and separately budget for the cost requirement to make the connection when they become a subscriber from the from the lot line to the house y so this is all this is all staying in the right away we don't exit the right away on the property and OSP stands for outside plant okay yeah ton we have too many we definitely do um cost to run your system in front of everyone's PR that many per PR gotta y so that's that's kind of what I initially mentioned where um you know it's a build it and then they come thing you've got to make this heavy investment do this um and then we've got other components that are all budgeted in including Make Ready cost um and then there'll be some facility Capital cost as well um mean this would be a big operation you'd need office space and op Center space for that this is the software that I mentioned about 200 Grand you got the fiber management software and the EMS already that generator and then there's some four Electronics GE that you need as well um have to have vehicles for the field Tex um contract lab we in sourcing in your case um then you need what we'll call the fiber modems but this is what sits in the home of the business uh it's technically called not Network terminal um but that's the cost structure for those and then we do upgrade these it's a firmware upgrade in your seven at a cost of $40 each one was deploy the fiber drop so when someone subscribes this phe this is the capital involved with the fiber drop and the

connectors and the power cord since you're doing the installs inhouse then you've got the the selling weight shows up in that as well this is the cat um and then you've got to design it and so there's some Prof Services here relative what to happen to do all the engineering design so total capital is for first five years 166 million it's about a $200 million project when you include the other cost components um and as you can see the vast majority of the three4 of it is this network instruction here so it's passing all those premises at the cost that we showed you um and then make ready construction is is part of that so really you know consider this 15 million to move the the cable on the polls around so you can get on the pole as an additional part of network construction when you that the PES so unfortunately it's a very expensive environment to place this kind of infrastructure um and then this is what looks like over time so this is the initial build Period start up in year one um you know you're selecting construction firms Etc they're in the market for 3 years um we've got the O upgrade here in Year s and then a more expensive Electronics upgrade in year 10 like we talked about before okay this is the cash flow before Debt Service so about 16 plus million in cash flow so it looks a lot better than 1 a and 1B um but your Capital expenditures are here in the orange and you know those are are substantial so that's the 170 million roughly and then there's ongoing Capital

expenditures that you don't you don't ever totally stop um so you know even though you've got great operating income uh you've got to handle The Debt Service there's interest here that service principle and when you add that amount of Debt Service it's substantial um even at 4.5% um it erases that operating capital and takes you below unfortunately so about a $5 million net you know underwater each year after Debt Service so that's where Equity comes into play I'll show you that in a minute um because that's what typically would be required or some very different strategy like the local improvement district is something dramatically different which would be slower I mean it's been done there examples out there um but you know I don't know if that's something that you'd be interested in but um so if we look at this um the net cash position uh year 20 would be about a negative 110 because you are every year subsidizing at the level either in the white line and STS does that change with the higher uptake rate does it does yeah so our uptake the uptake rate was about 40% right I I Ed 38 yeah it would um now when you do that it really improves cash flow you do need more CeX though because connecting customers and electronics go up so the bond amount goes up but it's more financially you know solvent if you will because of improved cash flow I'm sorry to have another stupid questions fine when you went out all the way out to 15 to 20 years did you do any discussion with the city

and what they had in terms of their future forecast of the population growth because that those numbers are going to change by the population growth that's going to happen 15 20 years from now and so the revenue will change that's correct yeah good point yeah and we do so we're using these numbers here so I can't see it yeah sorry so residential you've been growing at 1.9% a year in terms of residential households on the business side you've been growing at 1% and so we do have those in there is that for your in your experience is that good dead or different that's pretty consistent with what we usually see yeah that's what that little slice of capital is every year yeah it's building out all those house subdivision you're going in you're always you're always adding Network city is growing yeah that's this that's this Orange right here and and with some other stuff but you know there's you got to replace Vehicles you know we replace every six years so yeah and there's CH connections all that so yeah um yeah I wish it were better news um so so this here it wouldn't it's not nearly as dramatic um but you need general fund transfers here two so the only way to solve it other than really changing a strategy to a local improvement district would be to provide Equity funding up front um and to make it work um you're you're looking at a range of about 90 mil and that would reduce the amount of debt required to such a level where the debt the annual Debt Service would be low enough

that the operating cash flow recover it providing the equity you are reses yeah yeah well well we've had clients do this we have it's happening we got that balance the checkbook and see what we got okay so you know if we look at the um I know it's a mixed message and it's I I I think simply I guess but you know demand side it looks great you know that the 1 a1b that' be kind of tough but you could selectively do that um you know it'd be nice if you didn't have to do so much immediate upgrade work like Neil talked about um but you know if we look at Last Mile that that's really a challenge but the demand is certainly there um there certainly is an affordability issue there's a value issue there's a lack of satisfaction in this market but we're up against the supply side which is saying it cost a ton of money to make these connections um and we can't get Grant dollars here um so you know we're just kind of left with a you know a tough situation in terms of dealing with the bu structuring and going through this part I have a question yeah even if the city didn't do any of the scenario they have a fiber Network they run a lot of really important services off the current Network and I consider it its own small City should they be making those upgrades to improve their Network so they don't have firly safety going down because there's The Kinks and the cables and the vaults that are small and did you address that at all for as far as the recommendations yeah the budgets are in

there for that 24 to 36 month plan the testing and the upgrades 8 million right yeah but you were saying like if you move into these other markets but if you didn't do the market no that's regardless regardless those are improvements for our own network yeah so we address both to be clear because yeah it's a little confusing but yes you should maintain an enhance the network we kind of looking at this kind of jumping up a level to the car of grade to sell access onto that fiber plant to the external community and that's that's where we're seeing you could do it but it would be really hard to make that self-sufficient so Dave the um all these models are negative if you're only thinking of about the city are there other entities that will benefit and that that's in a sense to the city exit too for example under the LD fiber model um well you know the five people you and you looked at the biggest reason why they thought the city should do have to General Economic Development yeah is there a return to the community in terms of jobs and economic activity and prosperity and other things that are positive that if you have a different set of books that measured social return and other kinds of return are there other forms of return that don't show up on the city's ledgers that could justify doing something like a LD fiber which starts to break even but then doesn't stay not and broken yeah I think the answer is yes and I think the evidence of that is Hill's decision to fund it with

so they must have felt like it was worth expending those resources that the city has to put in that fiber system and so yeah I think the answer is yes um I think our only our role is again it's not normative it's it's just to say this is what it's going to look like if you do it just so you're going in eyes wide open with what you're undertaking if if you proceed with that but of course there are gu I'm saying for example U fire dep are a money loser never make any money they're not supposed to right we view this similarly it's a money Department what's that the fire department don't each other yeah so what I'm just saying is sometimes you spend money not because you've make money not with it right that it's a service but you have to J you know the value to the community of fire Services un questioned is there a value to a lit fiber model which is a least negative or that would justify it to policy makers to the public there is it's unfortunately it's kind of a trade-off because the most value would come from scenar 2 I mean it' be households that have been paying you know 110 plus dollars a month on fast now we need to pay Seven um on the lit access side and you know yeah they would like uh you know they're they're very positive and open to having you as an alternative provider but I I think it's um incremental gain in value and and that being a game changer to that segment is is not super strong I benefit those who are doing okay already yeah yeah so it was uptown's overall

recommendation for the city to have retail is that what you're sugges oh boy that was a tough question we I thought he was answering you started talking no I don't I don't think we have a recommendation in terms of where you go other than you know I think we've laid out a plan and the the financial requirement to enhance the network as it is today and you know keep it competitive and work but um but I think in terms of these other opportunities we it's up to our clients how about Hillsboro what they do they went in with equity and they are completely retail they're completely retail they're doing a slow build out because they're using Equity I think right now I just looking at those guys they're a similar City to to us no they're not small look them up but they they are they're using Equity they right now pass about 4,000 home um they're three years into it and they're they're moving slowly they're not b you build cost what are the I'm curious what are the other model cities that you that would fit into our picture conru I'm sorry what our construction costs are substantially higher than it sounds like because we're older and we have that Patchwork is that why no it's just because the the environment up here contractors needing more money I don't see me in in Florida they're they're getting Directional Boring for $12 a foot so very expensive um I guess we've we've kind of laid Dave has laid out what the conditions are for you to have financial performance that you won't be

that you won't regret in 10 years and that is to not take on $200 million that service that you've got to You' got to put up $90 million now that you're willing to just put in just like you do for roads and everything else say I'm gonna let it ride not having $90 million in debt which is going to bury you that kind of desp spiral general fund transfers can't that aren't being covered by your cash flow for Hillsboro was 107,000 very similar to B yeah Hillsboro was $850 $8 so we meet the fcc's definitions for being served du the yes all the providers all the all the competition here um but do and I don't know if this is in your scope but do we meet Wasington waston State goals or the state's Broadband that they want to have met by 2028 and you see any hope of getting Equity essentially from the state everything's oriented now through those Federal program so the way that be is being administered which is 42 do one that's active is through State offices so every state their Broadband office has to see a plan to the N how you know what the funding how they use it and how they decide which BS they funded and then the ntia approves that state plan and then the state is responsible for Implement years and so it's all going through that so it's not like there's some outside there's some examples where there are small programs that will fundability studies or some planning work that can come from the state level um California has that for example but you don't have any real money that

we do anything cl to this state focus on Administration yeah like Point Robert said you we are I guess my question might be more towards John um so as uh as a city as we look at our growth and where we're growing um I guess I would predict it's going to be north um and that means schools that means uh pump stations fire stations maybe police savance my Public Works um so that we have the right infrastructure redundancy have you do we have it mapped so that when we're digging up roads and other things that we're going to be making sure that conduit and fiber um is part of that I keep thinking we have the the propos mat and that's kind of or this that is the moving forward plan as we rip up the street and that on what's going in a good example right is re build kind of off a Boulevard down to Warf right um it crosses railroad tracks very expensive to do while the city's doing that putting conduit in there in preparation for the southwest side of the ran I just think of Telegraph Road um I could have been a missed opportunity given King Mountain development and heading out if especially if we go out towards Dewey valy um so there's areas on the map that we were shown here that if we grow given the recent meeting that we had with um the county and talking with their planning department if we reexamine our ugas and where the city goes I imagine um some of the ug area I didn't see that necessarily highlighted that much on the map it looks more like what's within the city um the

urban growth area was included them so so yes they were I'll speak real quick to tph also so the the map I think was magenta and yellow maybe we came up with that about five years ago internally but well not just internally but the school district's a partner with us so we went to them and talked about school planning and where they might need to go we met with our our plants and utilities about where future Pump Station going go our needs in the traffic area and and so we we we looked at this map for our internal use and it was basically a 20-year look of where all of our partners needed to get to and so that's what that other color is besides the existing infu and so Telegraph Road was not on there but as you know James Street is in our six-year tip and that is on that is my question too with the city does the city have um money given to whoever needs it to be able to put conduit in the road whenever we have the road open what is the recommendation and what they putting on in roads and piecing it together as roads do it most cities adoped that doy yeah there's there has to have a budget for that and you have to have the money it's not free cost money to do that so does our city put that together as a fund so whoever's supposed to be administrating that can find it out there we got big once all see we have got guidelines we have something so for example on the James Street project when that goes to bid we're going to put it conduit I here yes um and when I see the list of

funding that will pay for that I'm going to help see a few State several grants of our Local transportation dollars am I going to see an line item for $180,000 from the general fund which pays for the conduit Fortune I don't think the general fund no it it's going to be looked at it literally will be a conduit resting next to the street lighting conduit because we will bring everything up to Urban standard there a few Street funds for it yes now the cost of the plastic used to be an afterthought you know about the open trench throw it in there right we literally would do that we ended up with some shallow condo a contractor would be ping a sidewalk be like hey future I'm out there throw some cond concrete right don't have that policy not allowing that technology so Melissa's question we're going to just build economy price into the larger project and it'll be paid for how we pay for the larger project I think that it will also depend on what the what the fiber is so the utilities we PID for some f there multiple funding come with what we'll see is if if what going for the ues we'll probably make so I might see $100,000 from the water fund for a $5 million project that or that's for fiber conduit to run the pump station what about the conduit that doesn't have any purpose right now that would fall back fun that's where the fiber that's where fiber right now is I think the city needs to talk about that policy because I know a lot of citizens don't think the city's putting any

cond I think it's important you advertise that you are is part policy yeah and I'll fall back to that map because you know like I say we went to all of our partners and and at 20 year forecast whenever a any sort of project comes up we you check that just like we check the bike plan and the bed plan all these plans coming together and that I that's going the difference is is and correct me if I'm wrong it goes in if it is going to fit the need of the city whereas um members of the community want it in regardless with the overall goal that if it's in place eventually we're going to be able to be a direct provider and it won't be as expensive because we already have long runs that will get closer to that last mile so I mean that's kind of the difference we have people in the community advocating for conduit and fireberd to go in every time we open up the street regardless of whether or not the city projects a need and so there's always been that question well you have to talk about the fiber and educate because you can't put two blocks of fiber in and another two blocks five months from now and another two blocks your your network look like what it looks like now where where new conduit new fiber could be run for future gr the cities and future needs for us and other people as well um but going back to the green part aren't there parts that green that should that need to be enhanced or replaced is that one run down bouard so that one is that one is currently exhausted right so

we the color for that things which are currently green which need to be upgraded is there a map with that on it with with the upgrades the majority of the dollar of the upgrade really isn't I'm going to say fiber it is going to be upgrading the walls and the straight light cond which is currently in the ground that is that $8 million so what we'll have to look at right there right is is how are we going to fund that Neil said hey we can do it in two years if there was $8 million available in two years um what's more realistic is saying how much budget can we afford to do these prioritizing hey here's the backbone ring because the idea for the architecture is we have shallow condo we have problems with shallow vaults and and constructive fiber B fiber two small walls um by building brings we build more resiliency for for I's network and to support the city location sites so if we take a cut because somebody's cutting up a sidewalk and we're right below the sidewalk it doesn't impact it we don't take down all the city's employees the cities work even though we're not redoing all the conduit for the city to make it you know Carrier class bury it 36 in right we're looking and saying hey how can we leverage what we have today get the most out of it get it as resilient as possible City operations with the least amount of capital that's really the goal I know that seems like a really that seemed like the easiest most obvious thing to do I'm I'm thinking in terms of like a bicycle

Mass B this we we identify all of our needs more than we can afford so what because we prior prioritize them into tier one year one tier two year two we bite it off a couple million couple some number per year and in five years we're feeling good and in 10 years we're feeling better so I mean that's that seems doable that's that's not transformative that's just like that's that's housekeeping right that is housekeeping and and so so that $8 million has to happen as part of C right how fast we do that I I'm sorry Neil we're not it's you know we're just not going to have I won't foresee the the budget expect to do those up right what we want to prioritize is theand sites for the city where City's employees where we take an outage and it's going to interrupt City doing business so we want want to prioritize that we want to prioritize our plan we don't want you know Pump Station failing and not being able to communicate they're the things we prioritize while we're so John that prioritization scheme it doesn't look like the inner middle and outer ring it looks like a different no it was the the ring with all the little vaults on it that that is the exact same ring that is the fiber that exists today that's the infrastructure that's in place what I'm saying is the I fig what they call primary secondary tertiary those rings that ring agrees with what you're talking about which prioritizing reliability of Serv which most likely affect the most City function that well then again seems

like a no-brainer and again it's not transformative but good but but it needs to get done right is is this is what needs to get done so so when I joined the city that was I had to start looking at what needs to get done and I was really glad to see that Uptown in the report I had that same vision of of what needs to get done couple years ago we dropped some big black 36 hit sewer pight SW somewhere along the boulevard big um I don't know how far they went I think were sewer think gravity Fe you do any cond work at that time I thinking is that was one of the exhausted seg that was the exhausted next may I don't think so ex the street next to the street is it off on the Block is it hang in the air the sewer work was BL side FIB yeah that's what that's the Bine is yeah that's not a conduit capacity issue that that we're having along that run it is a fiber count issue do we have a room in the conduit yes oh we just have we just have to make the balls figure well because when we're building it we put street light vaults in that's the your bosses and talk to their boss and have her bring it to us in the budget that seem like a good thing I were yeah and and that helps our other entities um as we've been working with the school district um they are interested in pursuing a ringed architecture for their schools and having a run um that is the furthest w west and south in the city making that bring as big as possible is a good thing right there's several schools um down in there

several schools along that back so so that would be a benefit to the community as benefit to school district benefit does the school district publ publish a map of its Network or do you keep that kind it's the same network the it's the same network where when the network was originally built and fill down as a shared architecture so there is there is is hard to find a fer you know in City Network where you're not cohabitating some some form just the ones going to the schools over the the school property those aren't depicted on here theal so peace health didn't participate in your focus survey hosp um we tried a number people we tried for several weeks and number of people there to get them participate any other questions thank you for well um thank you everybody for attending and and um thank you to daal yeah the thorough presentation it's been come together ands thank you for advis for inviting the Broadband advis fig it was the least we could do given any future main like this or to hear one of the things I was about saying that I think what I heard was that the the dark fiber the aerial from right we actually Bellingham PUD a vist network originally was a vist network was acquired by Bellingham dud that was moved into the city fiber and the reason it bus so even though it's 20 plus years old the best it was actually construed El standard um it is a ring that goes from um C Street out to um centry link their their Co and the background so it is in the downtown area you

were talking about the last saying that difference area was 18 versus are we on the B going to get the like deck yes thank you notes about what's on which side thank you very much thanks for your time