Demand Aggregation Workshop and How to Bring Broadband Home

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Demand Aggregation Workshop and How to Bring
Broadband Home

• Its the Harry and Mark Show!!

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This Isnt the Field of Dreams

• You cant do a build it and they will come
  because nobody will support the build-out
  without a solid ROI
• Broadband will EVENTUALLY come to a theatre near
  you how long are you willing to wait to see the
  movie or are you waiting for the video release?
• You must take the initiative locally to obtain
  broadband services in your near future

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What is Demand Aggregation?

• What is it?
• Aggregation of all internet usage within the
  business and commercial sector of the community

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Partnerships Building Relationships

• Locally within the community
• Regionally multi-county
• Partnerships may involve working with existing
  service providers and building new alliances
  key element

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Issues Within the Community

• What are your issues?
• Lack of service
• Lack of high speed access
• Price to high
• Quality of service
• Service interruptions
• Lack of competition

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This is a Business Application

• Business and commercial use such as traditional
  businesses, large educational and health sector
  users
• This process does not benefit residential users

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Sparkplug Needed!!

• AC, Champion, or Autolite? Guys thing!
• A strong locally committed individual or
  organization to champion the entire effort from
  beginning to end
• You must have a SPARKPLUG or the process will
  fail

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Whats Needed?

• Committed local citizens (sweat equity)
• Contributed local services including meeting
  space, printing costs, etc.
• This is not a cheap undertaking you may need Big
  Bucks (and we arent talking about the four
  legged kind with antlers)

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Reality Check (or Will the Contract for Services
ever be in the Mail!)

• Not a short term effort
• You may not get a marriage proposal or a solid
  business case that makes sense to a service
  provider

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Six Case Models
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The Findlay Ohio Model

• Issues
• Lack of high speed access
• No local POP (were not talking about sodas and
  soft drinks!!)
• Strong businesswoman became Sparkplug.
• Three sector collaboration model business,
  health and private higher education/college

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Findlay Model Continued

• Process began in March 2000
• Off-shoot of E-COM Ohio study
• Established Telecom Infrastructure Committee
  (TIC)
• Average core of 5-15 members
• All members were invited
• Formal subcommittee of Findlay Chamber of Commerce

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Findlay Model Cont

• Conducted two studies to determine Demand for
  services
• First study focused on key business and major IT
  users
• Second study went to 30-45 businesses
• Sparkplug/chairman of TIC committee coordinated
  all communications between members

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Findlay Model Cont

• All expenses were absorbed by local businesses
• TIC planning meetings were closed to the public
• All Chamber meetings were open to the public
• No media involvement initially
• Chamber received routine updates from IT committee

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Findlay Model Cont

• Service providers initially contacted
• No involvement once the planning process started
• At completion of planning process, vendors were
  invited to make a presentation
• 15 providers made presentations including telco,
  cable, ISPs and others

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Findlay Model Cont

• TIC concluded that service providers would not
  make investment in infrastructure because demand
  did not generate enough ROI
• TIC decided to fund infrastructure development
  through private venture capital funds - 500 K

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Findlay Model Cont

• POP was installed and turned up on 9/1/01
• Created Silicon Alley in CBD to serve major
  businesses in community
• A for-profit company was established to run the
  new ISP
• www.centracomm.net

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Findlay Model Cont

• Centracomm continues to expand
• Service providers immediately started offering
  DSL and cable modem and other enhanced services
  once the POP was in place

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Findlay Model Cont

• Model was successful in bringing both high speed
  access and a POP to Findlay

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Dalton GA Utilities Model

• DU was looking for a means to connect its
  numerous off-site facilities in the community to
  its central HQ to improve management over-site
• DSL and cable modem services were not available
• DU decided to install fiber infrastructure

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Dalton Model Cont

• DU provides water/sewer/gas/electricity service
  to the community
• Many large business users are in close proximity
  to DU off-site facilities
• DU is part of a statewide wholesale electric
  service provider)

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Dalton Model Cont

• Planning committee established in Sept 1998
• Small committee (CEO and 2 IT managers)
• Initial concept was internal business application
• When getting ready to string fiber, DU decided to
  overbuild and offer commercial service to
  schools, etc.

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Dalton Model Cont

• Planning phase was short based on internal
  requirements
• ROW access was not an issue because DU owned
  existing utility poles and R-O-W
• Initial planning to fiber placement took one year
  in duration

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Dalton Model Cont..,.

• DU decided to use an ATM network with six
  switches lots of horsepower mid-sixties muscle
  car!!
• DU constructed a mesh network design with
  built-in redundancy
• Network included wireless applications with
  antennae on existing water towers (convenient if
  you happen to own all the water towers!)

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Dalton Model Cont

• Entire project was internally funded by DU
• A consultant was used for engineering design and
  fiber placement
• DU conducted a survey of key businesses in close
  proximity to DUs facilities

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Dalton Model Cont

• DU held an open house for large industrial
  companies to showcase the fiber network
• DU produced a public information video to be run
  on local community TV network
• New ISP providers have come into the community

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North Carolina Model

• 23 county effort
• Initial discussions began in 1993
• In 1995, Appalachia NC became involved in a
  statewide strategic telecommunications planning
  effort
• ARC underwrote the Appalachian Region

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NC Model Cont

• In Spring 2000, ARC began funding a Demand
  Aggregation project in the 23 county area
• Southwestern Community College became the
  Sparkplug for the project
• SCC invited other major partners to participate
• Five to eight key individuals coordinated the
  whole project efforts

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NC Model Cont

• Purpose was to secure high speed access for
  economic development purposes
• Steering committee was formed
• A technology advisor and legal advisor were added
  to the steering committee Pro Bono
• Local planning officials, economic development
  individuals and 14 Chambers of Commerce
  participated in the project

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NC Model Cont

• Four committees were established business,
  legal, political and technical
• Over 100 organizations participated on the
  committees
• Each member was required to sign a
  non-disclosure/confidentiality agreement this
  was a key element that was critical in moving the
  project along!!

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NC Model Cont

• Committee discussions included tiering of
  telephone services, redundancy, scalability,
  subscription rates, legal issues, quality of
  service issues, last-mile and middle-mile
  issues, cost for internet access, POP needs,
  demand aggregation issues, economic development
  needs, and many other topics

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NC Model Cont

• A major survey and data collection process was
  undertaken
• 12.6M plus in demand usage was identified
  (internet/local and LD)
• Analysis was done of existing telephone bills
• This was an eye-opening experience and not a
  Bloody Mary in the morning!!!!!

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NC Model Cont

• This allowed the steering committee to share
  normally protected confidential data with
  potential service providers who were willing to
  sign non-disclosure agreements
• A second demand aggregation survey was undertaken
  and more demand was identified
• The project has just been completed with the
  development of a for-profit / non-profit
  partnership arrangement that will build numerous
  interconnecting sections both last mile and
  middle mile to connect to existing
  telecommunication infrastructure.

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NC Model Cont

• In January 2002, a 4.3M federal grant from the
  Library of Congress was approved that would
  underwrite deployment of fiber optic network to
  serve schools and libraries. In FY 2003 an
  additional 10M was approved by a Congressional
  earmark.
• Incidental costs associated with the planning
  process were absorbed by local committee members

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NC Model Cont

• ARC invested 582k in the demand aggregation
  project including salary, travel, supplies,
  marketing and advertising costs, web-page
  development and other services
• Numerous consulting and legal services were
  provided pro bono

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NC Model Cont

• The media was not initially involved in the
  process however steering committee members gave
  numerous presentations throughout the 23 county
  area and the media picked up on what was being
  done

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NC Model Cont

• From the beginning, the steering committee was
  seeking a service provider alliance partners
• Initial contacts with telcos were not encouraging
• Service providers indicated they would be
  interested in the project findings

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NC Model Cont

• Initially, service providers felt there was not
  enough demand to warrant the infrastructure
  investment
• After 12.6M of demand was identified, two
  service providers were considered as being
  possible alliance partners
• One of the providers decided that there simply
  was not an adequate ROI and withdrew

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NC Model Cont

• The second provider was contacted
• A number of issues were identified ownership of
  equipment, the need for subsidized funding
  middle-mile connectivity concerns were paramount,
  ROI projected to far into future, sharing of
  annual revenues between service provider and
  non-profit organization
• So, is it really possible to have a revenue
  sharing arrangement with a service provider?

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NC Model Cont

• Persistence pays off..
• In late 2002 Wholesale Transport costs began to
  tumble 1,600 / 20 anywhere on net and as a
  result numerous secondary service providers
  became potential partners.
• A new 501 organization was established in order
  to own and deploy infrastructure
• New telecommunication competition came into the
  market place, prices continued to drop, and
  deployment is occurring!!!!!!!

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Sonet Ring and POP

• In partnership with DukeNet and other providers a
  214 mile 48 strand - Sonet ring is being
  established
• A POP has been established in Asheville that is
  linked to Greenvilles POP, and the POP in the
  Research Triangle.
• The State of NC and local partners provided
  funding for the network
• Pricing on the ring is priced at Tier 1 level
  like Washington DC! A total Win!!!!!!!!!!!

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The Berkshire Connect Model

• In the mid-90s, two major companies left the
  area which resulted in 13-14,000 people losing
  their jobs
• Several new tech firms moved into the area and
  needed high speed access
• T1s were available from telco but there were
  service quality issues and pricing was a major
  concern for the small business sector
• Existing local businesses had pent-up demand for
  increased telco services

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BC Model Cont

• Community leaders recognized the need to improve
  their economic development base
• Increased telco services were viewed as an
  integral part of future economic / social
  development of the community
• Initial planning group started in 1996
• All four sectors were involved in the initial
  planning stages
• Local Planning Commission became the coordination
  organization

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BC Model Cont

• Mission was twofold expand high speed access and
  lower existing LD rates within the business
  community
• This was a business/commercial user model (did
  not include residential users)
• In the early stages, there were community-wide
  seminars to discuss steps to be taken
• Local press attended these initial seminars

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BC Model Cont

• Three committees were established cultural arts,
  education, and business/industry
• Some members were recruited all were volunteers
• A coordinating task force was established to
  coordinate the overall process
• A critical user sub-committee was eventually
  formed to address technical issues

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BC Model Cont

• The critical user sub-committee became bogged
  down (in a quagmire of technical muck jargon and
  lost their way in the swamp!!)
• They couldnt figure out which technology would
  work best fiber vs wireless, radio vs
  microwave, satellite vs 2- tin cans on a tight
  string!!!!

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BC Model Cont

• The coordinating task force met monthly and all
  other committees met as needed
• Beginning in the Fall of 1997, a consultant was
  hired to develop a business plan and address the
  technical network issues

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BC Model Cont

• A survey was done of the major business users to
  gather information on their use of T1 lines, the
  cost of service, and the quality of service
• The survey also explored additional high speed
  line needs of the business community
• A key component for the businesses was lowering
  LD rates

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BC Model Cont

• The project was begun with a 500K grant from a
  State Technology Fund
• The community also floated a 1M bond issue to
  raise additional capital for the future potential
  of the deployment of technology
• The overall planning project took 2.5 years to
  complete

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BC Model Cont Engineering

• It was determined a microwave/radio solution
  appeared to be the most practical and cost
  effective solution to reach the nearest POP (an
  existing microwave tower was on a mountain nearby
• It was determined that vendor pricing must be
  based on a flat rate model as opposed to distance
  sensitive pricing
• It was also determined that there needed to be
  quality of service improvements over existing
  telco offerings and substantial reductions in LD

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BC Model Cont

• The project was put out for bidding to a variety
  of service providers both ILEC and CLEC
• The local cable service provider was not
  considered a potential viable service alternative
• The local telco was not considered a potential
  viable service provider based on the existing
  distance sensitive pricing

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BC Model Cont

• A community web-site was established to keep the
  local business community and other local
  interested citizens updated on the progress of
  the project
• www.bconnect_at_rnetorx.com

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BC Model Cont

• Two competitive service providers (CLECs) were
  ultimately selected to provide the services
  requested in the RFP
• Global Crossing and Equal Access were selected to
  provide the following services (lower cost T1
  access, improved quality of service and lower LD
  pricing)
• Business LD pricing was anticipated to be reduced
  from 9 cents per minute to just over 2 cents per
  minute
• One company realized a 45k monthly savings!

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BC Model Cont

• The Global Crossing/Equal Access solution
  required a staged build out process
• 25 or more new customers were needed to warrant
  further construction of the network (the network
  was deployed incrementally)
• The new BC network is currently serving in excess
  of 65 non-residential customers

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BC Model Cont

• After the BC network became operational, several
  ISPs came into the area and began to offer
  services
• The BC DA model is being replicated in other New
  England communities

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BC Model Cont

• Global Crossing has just come out of Chapter 11
  bankruptcy protection
• Other replicated models have been on hold pending
  the outcome of the bankruptcy petition
• It is anticipated that these communities will now
  move ahead

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Blacksburg Electronic Village

• University based project in Blacksburg VA
• Blacksburg has a population of 36,000 about 85
  of the population is affiliated with VA Tech
• BEV was initially funded by a grant from VA Tech
• In 1993, dial-up access was offered to the city
• Alliances were initially forged with teleco

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BEV Cont

• In 1994, ISDN and Ethernet connections were
  offered in the city
• Today, almost 87 of businesses in Blacksburg are
  internet users with 75 advertising on-line
• 60 of Blacksburg residents have access to
  broadband connections
• In progressive stages, components of the network
  and customer base was turned over to private
  companies

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BEV Cont

• BEV works closely with the Town of Blacksburg,
  local civic groups, business and individuals to
  ensure that internet tools are used
• BEV is also getting involved in e-commerce
  activities and other uses of broadband services

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BEV Cont

• Lessons Learned
• Application worked very well in Blacksburg
• Large major university presence
• Large body of personal computer users
• Subsidy type funding provided by school
• Would the model work in a different community??

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La Grange GA Model

• LaGrange is located 70 miles southwest of Atlanta
  on the Alabama border

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An old textile based community with a 30 year
decline in textile employment

• Overall AD project was part of a revised economic
  development program to diversify the
  manufacturing economy

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La Grange Cont

• The city council and the citys economic
  development project manager became the Sparkplug
  for the project
• The Chamber of Commerce played an integral part
  in the overall process

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La Grange Cont

• In early 1990s the city established a telecom
  committee
• In 1992, the city hired an engineering firm to
  examine existing telecom infrastructure and
  outline future needs
• In 1993, the city entered into negotiations with
  local telco to address citys future needs and
  expectations

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La Grange Cont

• Local telco could not initially respond to citys
  needs based on ROI
• The city is a provider of water/sewer/gas/electric
  ity similar to Dalton Utilities
• In 1993-5, the city placed a 4 mile fiber ring
  around the city and leased it back to the telco
• In 1995-6, the telco installed a digital switch
• In 1997, the city filed as a competitive local
  exchange carrier (CLEC) for businesses and
  institutions

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La Grange Cont

• In 1998, city established public/private venture
  with the local cable company to provide broadband
  access
• The city financed a HFC cable and leased back to
  the cable company
• The city has spent over 11M up to this point

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La Grange Cont

• In March 2000, the city announced broadband
  Internet access through the establishment of the
  LaGrange Interactive TV service (LITV)
• The LITV is a web-based TV access to the internet
• This permitted E-mail and web surfing through a
  wireless keyboard

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La Grange Cont

• By August 2000, 1500 units were installed in
  residential homes
• By September 2001 - 4,377 units were installed
  in residential homes
• The city created a web portal loaded with
  specialized content on how to use the web TV
  appliance
• Cable TV provides training program on how to use
  of the LITV system

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La Grange Cont

• Additional content is routinely added by the
  community to the web site
• The city invested over 420k in the web TV
  appliances and installation costs
• The city installed all systems
• The cable company then reimbursed the city for
  installation costs

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La Grange Cont

• Results
• City residents are learning computer skills from
  home
• Web content compliments school curriculum
• A job listing service has been established on the
  web-site
• City-wide communication has increased
• Local E-commerce applications were developed

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La Grange Cont

• 35 new industries have now located in the
  community
• Textile industry decline has continued

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La Grange Cont

• Key Elements
• Numerous lease back arrangements were established
  with telco and cable
• Essential alliance partnerships were established
  with telco and cable
• System expansions were based on solid business
  decisions
• City did not attempt to compete with telco or
  cable

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La Grange Cont

• City was fiscally conservative throughout the
  entire process
• Cable company provided discounted services to
  city as part of leased arrangements
• Internet service in the city is currently free of
  charge through 2003

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La Grange Cont

• Through the entire process, the city has changed
  its economic development image
• The LITV program has increased product marketing
  throughout the city
• Basic educational skills have been improved by
  the use of the LITV

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How do you Interact with the Current Service
Provider?

• First approach existing telco/cable provider to
  solicit support
• If existing provider is unable to provide
  affordable high speed access into community, you
  may need to consider DA
• Upon completion of DA process, present results to
  existing providers

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Do You Need a Business Plan?

• YES
• You cannot sell your concept without a business
  plan (or Have we got a bridge for sale!!)
• You need a plan to obtain funding from any source

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How is the Plan Actually Used?

• Proves the fiscal viability of the DA project
• Selling point within the community
• All financial partners will ask you
  right-up-front for your business plan.
• You need it to solicit support from potential
  service providers and essential alliance partners
• Needed in RFP bidding process
• Garner political support if needed

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Demand Disaggregation

• There are situations where demand can be siphoned
  off via a public or private sector based network
  eliminating major components of the overall
  demand base in a community

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Demand Disaggregation

• Education networks involving state or regional
  educational entities (OH VA PA GA AL NY TN etc.)
• Health sector using private networks to connect
  facilities (GA AL PA OH NC SC)
• Government networks connecting state facilities
  and local facilities (GA NC TN etc)
• Businesses using private networks WalMart, GM
  Ford, Chrysler, and other local based businesses

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Demand Disaggregation

• E-rate funding
• Satellite access

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How to Finance DA Projects

• Local dollars
• State dollars
• Federal dollars
• Private venture capital dollars
• Foundation dollars
• Contributed services

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Who Leads The Charge

• Dynamic community oriented individual is a must
  (Sparkplug)
• Local government
• Utility district
• Higher education facility or health organization
• Local planning commission (council of govt)
• Chamber of Commerce or local business leader
• Non profit
• Other?

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Timeline for the Broadband / DA Project

• How long does it really take?
• The telecommunication industry is still in
  turmoil
• Strategic alliances are critical from the very
  beginning of the process
• Strength of the Sparkplug to coordinate and keep
  the process focused
• This is not a 12 month process

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Organization of Committees

• Not all DA projects will require all committees
• Background of participants will dictate need for
  specific committees

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Potential Committees

• Oversight Committee
• Technology/Infrastructure Committee
• Legal Committee
• Sector Committee
• User Committees
• Political Committee

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Committee Members

• Volunteer vs Recruited
• Relevant background
• Diverse group from community
• Do you want service providers?
• Is there a need for a consultant role?
• Do you want press participation?
• Do you want a non-disclosure agreements?

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Role of Consultant

• Do you need a consultant?
• For Technology issues
• For Legal issues
• For development of strategic/business plan
• For funding issues
• For overall coordination of process

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Will Demand Justify the Investment?

• There may not be enough demand to justify the
  expense of deployment by existing service
  providers
• Seek competitive alternative service providers
• There may not be enough demand for any service
  provider to deploy infrastructure without
  financial assurances

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If That Happens

• This is where you have to become very proactive
• Work with state PSC
• Become active in 271 applications
• Participate in potential over-earning reviews
• Monitor previously filed technology deployment
  schedules
• Work the political process
• Float a local bond issue as leverage

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The Technology

• Do not limit your thinking to one technology
  solution (Dont throw out the baby with the bath
  water!).
• Fiber or other traditional land lines
• Wireless radio
• Wireless microwave
• Satellite
• Cable
• Or a combination thereof!

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Public Infrastructure Ownership

• Means to an end OR see you in court!
• MS Create Foundation / not-for-profit
• VA City owned
• NC Combination
• Iowa State network

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Is This a worthwhile Effort?

• The take rate for high-speed telecommunication
  services is still about 20 25 nationally
• Is it a demand issue or a supply issue?
• Can you afford to wait from an economic
  development point of view?
• The DA planning process is similar to community
  development processes that resulted in the roads,
  water and sewer systems that underpin our
  community economic development today
• You need to have a community on-ramp to the
  information highway!