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Home My WebLink AboutBozeman_project_recommendations_v6 FINAL 1-19-15Bozeman Fiber Master Plan and Feasibility Study JANUARY, broadband planners DESIGN NINE This feasibility study was made possible by the generous support of the following organizations. Bozeman Deaconess Health Services Bozeman Area Chamber of Commerce Northwestern Energy Bozeman Public Schools City of Bozeman Downtown TIF District North 7th Avenue TIF District Montana Department of Commerce, Big Sky Trust Fund U.S. Economic Development Administration, U.S. Department of Commerce Disclaimer The telecommunications business is continually evolving. We have made our best effort to apply our experience and knowledge to the business and technical information contained herein. We believe the data we have presented at this point in time to be accurate and to be representative of the current state of the telecommunications industry. Design Nine, Inc. presents this information solely for planning purposes. This document is not intended to be a replacement for formal engineering studies that are normally required to implement a telecommunications infrastructure. No warranty as to the ﬁtness of this information for any particular building, network, or system is expressed or implied. Design Nine, Inc. will not be responsible for the misuse or misapplication of this information. For more information: www.designnine.com !!!!!!!!! Table of Contents Executive Summary 1 ......................................................................................................Feasibility of a Fiber Initiative 2 ............................................................................Overview of Master Plan Recommendations 2 ...........................................................................................................................About the Report 4 Master Plan Strategies and Goals 6 ...........................................................................................................................Long Term Goals 7 ...........................................................................................................................Short Term Goals 9 The Economic Impact of Broadband 12 What is Broadband? 16 ......................................................................................................................Existing Conditions 18 ..................................................................................................Next Generation Connectivity 21 ...........................................................................Significance of Big Bandwidth for the Future 22 .........................................................................................................Service and Gap Analysis 27 Setting a Vision for the Future 33 Economic Impact and Benefits 35 Risks 39 Why Invest in Fiber? 43 ............................................................................................................................Telephone/DSL 43 ............................................................................................................................Cable Systems 44 .........................................................................................................................................Satellite 44 .................................................................................................................................................BPL 45 ..............................................................................................................................................Fiber 46 ..............................................................................................The Wireless Broadband Debate 47 ....................................................................................Wireless Technology Trends and Issues 48 .......................................................................................................Fixed Point Access Wireless 50 ..............................................................................................................Mobile Access Wireless 50 .................................................................................................................White Space Wireless 51 ............................................................................................MIMO Wireless and LTE Advances 51 Business Models and Ownership 53 ..................................................................................................The Public/Private Partnership 54 .....................................................................................................................Private Sector Only 54 ..........................................................................................................................Municipal Retail 55 ..........................................................................................Wholesale Multi-Service Approach 55 ...................................................................................................Ownership and Management 57 Network Architecture 59 ......................................................................................................Modern Networks Overview 59 .........................................................................................................................Proposed Routes 62 .................................................................Network Design Summary and Recommendation 64 .............................................................................................................Architecture Evaluation 65 !!!!!!!!! Project Phases 68 ..................................................................................................................Early Phase Planning 70 ...............................................................................................Implementation Planning Phase 71 .....................................................................................................................Construction Phase 73 .......................................................................................................................Operations Phase 76 Best Practice: Planning for Success 83 Appendices 85 ...............................................................Broadband and Growth Policy Recommendations 85 ...........................................................................Sample Resolution to Amend Growth Policy 92 ..........................................................Summary of Public Input and Key Informant Meetings 94 ................................................................................................................................Case Studies 98 .....................................................................................................................Financing Options 106 .............................................................................................................Demographic Analysis 114 .............................................................Network Technical Design and Recommendations 126 Bozeman Fiber Project Master Plan 130 !!!!!!!!! Executive Summary In 2012, with the support of the Bozeman City Commission (Commission Resolution 4434) the City established the Broadband Steering Committee (BSC). The BSC is composed of technology sector professionals, economic developers, telecommunications industry professionals, ﬁnancial services professionals and local government officials. Since July 2014, members of the BSC have been working with Design Nine, a nationally recognized broadband planning ﬁrm to, in the words of Commission Resolution 4434, “bring fast, reliable, and affordable broadband service to Bozeman and the region in furtherance of the City’s economic development goals.” High-performance broadband is essential infrastructure for developing Bozeman’s economy. Technology ﬁrms, ﬁlm makers, medical providers, banks, businesses, and startups require fast, reliable, and affordable connections to their clients. Educational institutions increasingly depend on broadband to provide high quality instruction and meet standards for integrating technology into the classroom to prepare students for careers. Through a public – private partnership, the Bozeman Broadband Initiative seeks to increase access to ﬁber and signiﬁcantly lower the cost of broadband for business by stimulating competition for private sector service delivery through public and private infrastructure investment. The project team, convened by the City of Bozeman, the Broadband Steering Committee, and the Economic Development Council, was tasked to explore the feasibility of developing a community-owned, high-performance broadband network for Bozeman. The overall goal of this effort is to: Identify the kind and type of broadband network needed to retain existing Bozeman businesses and to help attract new businesses and jobs. Identify the beneﬁts of a high performance, affordable broadband network to commu- nity institutions like City government, healthcare, K12 schools, and higher education. Determine if such an effort is ﬁnancially feasible and sustainable. Identify the steps needed to be taken to initiate and develop the project if a decision is made to move forward. For local government to make an informed decision about moving forward with a broadband initiative, several questions have to be answered: Does the demand exist for improved high performance, affordable broadband? What are the design goals for the effort? If a new high performance ﬁber network is built, who will own and manage it? What is the business model for the venture (e.g. retail services, wholesale only)? Can the venture generate the necessary revenue to be ﬁnancially sustainable? !!!!!!!!!!!Page 1 of 130 How will it be funded? FEASIBILITY OF A FIBER INITIATIVE A Bozeman Fiber Initiative is feasible and practical. Bozeman has signiﬁcant assets and advantages. These include: Local demand - Bozeman has a critical mass of city agencies, K12 schools, colleges, health care institutions, and large and small businesses that can provide the early cus- tomer base needed to generate the revenue that would provide the ﬁnancial support for the network. Excellent quality of life – Abundant possibilities for rural living and a historic Main Street (unlike many suburban communities) can be an economic development attrac- tor, especially for self-employed businesspeople and entrepreneurs. Excellent recreational activities – The area has superb outdoor recreational activities, including extensive hunting opportunities, hiking, nearby Yellowstone National Park, and other many other outdoor opportunities. Rich history – The region has a rich set of traditions and history dating back to the early 1800s that adds historical interest to the area and enhances the quality of life. The city has some private fiber passing through it--more than some other similar ar- eas. This is currently an under-used economic development tool. Some investment is needed to make access to this ﬁber more widely available to the business community. Montana State University is a key asset and contributes signiﬁcantly to the economic prosperity of the region. Faculty, staff, students, and off-campus facilities all represent a signiﬁcant market opportunity for high performance affordable ﬁber services. Downtown Bozeman has tremendous potential to attract younger people, start up busi- nesses, and entrepreneurs if affordable Gigabit ﬁber services are more widely available in the core downtown area, including some of the residential areas of downtown (for live/work opportunities). The cluster of 30+ photonics companies in Bozeman represent another key market segment that will be early prospects for improved ﬁber services. OVERVIEW OF MASTER PLAN RECOMMENDATIONS We recommend that the Bozeman Fiber effort have the following characteristics: Standards-based - Bozeman Fiber should be based on an active Ethernet architecture for the core network and for delivery of business class services to key anchor institu- tions and businesses. If in the future the network begins to deliver ﬁber to the home !!!!!!!!!!!Page 2 of 130 on a widespread basis, a PON (Passive Optical Network) architecture might also be deployed. Scalable - The initial design of the network will support a graceful expansion over time to be extended to all areas of the city with additional expansion to adjacent eco- nomic growth zones outside the City limits. Business-class capable - The network will be able to deliver any amount of bandwidth needed by any business connected to the network, with any desired quality of service (QoS) required to make Bozeman businesses competitive in the world economy. Redundancy and Resiliency – The initial phases of the network should be designed with a redundant “ring” architecture to minimize downtime from accidental ﬁber cuts and network equipment failures. Bozeman businesses and anchor tenants will have a high reliability network. Offer equal access to all providers – The network should be operated on an open ac- cess, wholesale business model with all business and residential services provided by qualiﬁed private sector providers. A single public wholesale price list will be used to determine the cost of provider use of the network. Equal access to all residents and businesses over time – The goal of a Bozeman Fiber Initiative would be to deliver high performance ﬁber services to all residents and busi- nesses as rapidly as possible consistent with ﬁscally conservative operations. Offer a wide range of competitive providers and services – Bozeman Fiber should be operated as a multi-provider, multi-service network with a wide range of competitive price and service options available to customers. Limited City Role - The City of Bozeman should make targeted investments in passive infrastructure (e.g. conduit, handholes) that further speciﬁc City goals (e.g. smart traf- ﬁc management, smart street lighting, reduced energy use, and reduced telecom costs for connections between City facilities. The City should also consider making spare conduit capacity available on an equal access basis for community-based and private sector networks. Ownership and Governance - Bozeman Fiber should be operated as an independent entity owned ﬁrmly vested as a community enterprise. This will provide the network with two important requirements: The enterprise will have the business and manage- ment ﬂexibility needed to make decisions efficiently and effectively in the fast-moving broadband business environment. As a private sector enterprise with appropriate community oversight and control, the effort is vested in the community and can be operated on behalf of the community and economic development needs of the com- munity, but will not be limited by public sector restrictions on operations or decision- making. !!!!!!!!!!!Page 3 of 130 Business Model - The network should be operated as a single high performance lit ﬁber (Layer 2) network available to any and all service providers, including incumbent providers who want access to the signiﬁcant market opportunity represented by Bozeman. This shared business model is fundamentally different from the twentieth century copper-based networks where each provider has to build and operated a com- pletely duplicated network (i.e. two providers each build a separate and duplicated network to reach the same customers, which results in higher costs across the board for customers). Funding Strategy - The Bozeman Fiber Initiative should develop a “basket” of funding options, including long term service commitments from anchor tenants (e.g. the City, schools, major businesses), state and Federal grant opportunities (e.g. public safety grants), revenue from the network itself, charitable contributions, tax credits, and one time fees for costs associated with connecting a new customer to the network. ABOUT THE REPORT ‘This report presents information that the City and stakeholders needs to make an informed decision about strategic investments in modern broadband infrastructure. This includes investments for City infrastructure needs, and for the wider business and institutional needs in Bozeman . Business retention and new business attraction can only be accomplished Bozeman has the right telecommunications infrastructure that will enable area businesses to compete in the global economy. A word about the report content and organization may be helpful at the outset. This subject area is a very challenging one for governments. The complex technical nature of the undertaking sometimes makes the policy issues hard to assess. This report attempts to assist in this regard by providing technical information which can be thought of as informational or educational, in the body of the report and in several appendices. The goal is not to make this a technical document but to assist the reader in placing the policy decisions in context. The Economic Impact chapter describes the potential beneﬁts of a community-owned ﬁber network. The What is Broadband? section discusses current and future bandwidth needs for Bozeman and identiﬁes the kinds of uses that the network will support. The Setting a Vision for the Future? section describes a set of goal and objectives (vi- sion) for the effort. The Why Invest in Fiber? section provides a detailed overview of current network sys- tems and technologies and makes the case that ﬁber is essential. !!!!!!!!!!!Page 4 of 130 The Business Models and Ownership section describes a variety of business models and ownership models available and in common use and their advantages and disadvan- tages. The Network Architecture section discusses technical aspects of the recommended net- work design. The Project Phases chapter provides an overview of key tasks and activities. Finally the Planning for Success section provides a summary of best practice from other community projects. !!!!!!!!!!!Page 5 of 130 Master Plan Strategies and Goals This report provides a series of strategies and activities to help get more and better broadband in the city of Bozeman. Increased affordability and availability of broadband delivered services has the potential to increase job creation in the city, help retain existing businesses, and improve the City’s ability to attract new businesses and entrepreneurs. While many residents and businesses have access to wireless or copper-based “little broadband” services with bandwidth in the range of 1-10 megabits/second, many other cities and towns in the country (more than 130, according to Broadband Communities magazine) have already made the leap to ﬁber-based “big broadband” with a minimum bandwidth of 100 megabits/ second and many of those communities are now “Gigabit Cities” with a standard residential and business connection of 1,000 megabits (one Gigabit). One might reasonably ask, "Why does anyone need a Gig of bandwidth?" The value of a Gig ﬁber connection is about the future, not the present. It is about preparing citizens, businesses, and the community to be able to compete for jobs and businesses over the next ﬁve to thirty years, with future-proof infrastructure that will support future needs. Bozeman’s economy has a long and rich history of being driven by transportation, ﬁrst as a river and trail crossroads in the early part of the 19th century. As the railroads began to open the West to increased commerce and growth in the second half of the 19th century, the rail transportation system was critical to Bozeman’s continued prosperity. More recently, the Interstate Highway system has brought new opportunities to Bozeman. In the past ﬁfteen years, the U.S. economy has been undergoing a dramatic transformation as digital road systems now transport the products and services of the new economy. As just one example, music was formerly a “heavy” product that required both a local and national road system to carry ﬁrst vinyl records and then CDs from manufacturing plant to customers. Today, virtually all music is transported directly to buyers over the new Internet- based digital road system. Software, formerly sold in stores, packaged in boxes, is now delivered via the digital road system. In the week after Christmas (2014) Apple Computer sold and delivered more than half a billion dollars in software--all delivered via the Internet-based transport system. Today, Bozeman needs a modern transportation system--a digital road system--both within the city and to other points in the state and the nation. If the City wants to stand still economically, then it can stay with its current copper-based telecom infrastructure, effectively freezing economic development where it is today. But if the community wants to grow economically, retain businesses, create jobs, attract entrepreneurs, and bring new businesses, the Gigabit connection in key locations like the downtown core and other business districts become a critical part of a forward-thinking economic development strategy. !!!!!!!!!!!Page 6 of 130 In summary, if the a ﬁber initiative in Bozeman makes targeted investments in broadband infrastructure, with the goal of creating a successful public/private partnership, expected outcomes can include increased economic growth through increased business attraction, increased local business expansion, and an increase in good-paying job opportunities. LONG TERM GOALS Long Term Goals Description Encourage Public/Private Partnerships Partnerships among the City, local schools, service providers, public safety agencies, and major businesses will assist with business attraction and lower telecom costs for all partners. Create New Business Opportunities for Existing Service Providers The City should provide only basic infrastructure and transport, and should not compete with existing providers by selling services to businesses and residents. This is best done by the private sector. Fiber Should Support Economic Development Broadband investments should be targeted to promote business growth and jobs creation. Reduce Cost, Improve Quality of Government Services City investments in basic broadband infrastructure will reduce the cost of telecom services and related expenses for City while simultaneously improving service delivery. Reduce Costs for Small and Large Businesses Modest investments in ﬁber and wireless infrastructure will reduce the cost services for entrepreneurs, business start ups, and existing businesses. Don’t Wait Many other communities have already made investments and are aggressively promoting their infrastructure as part of their economic development strategies. ENCOURAGE PUBLIC/PRIVATE PARTNERSHIPS The size of the region and the diversity of public and private interests in the city will require a commitment to collaboration among the private sector and the City of Bozeman. From a network perspective, the entire county is a single market. Important and critical partners include: The City of Bozeman and other local governments The K12 school system is an essential partner because it is among the largest users of broadband connections. Existing incumbent and competitive telecom service providers. Businesses, institutions, and other stakeholders that have high bandwidth needs. By taking the time to develop partnerships: Costs are spread across a larger market area, making the long term ﬁnancial sustain- ability much more likely. !!!!!!!!!!!Page 7 of 130 The larger market base will attract more providers and services, leading to even lower prices and a greater diversity of service offerings. The larger market base will also encourage more private investment, especially in cre- ating new and diverse ﬁber routes in and out of the city. It will be possible to raise more funds more quickly and thereby build to more busi- nesses, residents, and institutions more quickly. CREATE NEW BUSINESS OPPORTUNITIES FOR EXISTING SERVICE PROVIDERS Any local government investment in telecom and broadband infrastructure should be at the basic infrastructure layer of the network. The City should avoid selling services to businesses and residents. Providing basic infrastructure will allow providers to reach new customers at much lower cost and allow them to offer improved services to their existing customers. An important goal of any local government investment should be to create new business opportunities for existing incumbent and competitive providers. BUILD FIBER IN SUPPORT OF ECONOMIC DEVELOPMENT GOALS Bozeman needs more distribution and access ﬁber, which is essential for meeting future demand for broadband services as well as attracting and retaining businesses. Fiber to the home is needed to support work from home opportunities. Fiber to the home is needed to support business from home ventures, especially small business start-ups and entrepreneurial ventures. Fiber is needed to every economic development area and corridor in the city, and open ﬁber is needed in the downtown core and in other commercial and retail areas of the city to reduce the cost of broadband services for businesses located in those parks. Broadband is needed to both improve the delivery of government services and to re- duce the cost of those services. REDUCE COST, IMPROVE QUALITY OF GOVERNMENT SERVICES A shared network will help reduce the cost of telecommunications and broadband services for the City through increased competition and the cost advantage of shared infrastructure. Critical services like public safety will beneﬁt from a long range plan to make ﬁber available to most local government locations (e.g. ﬁre and rescue, police stations, pumping stations, and parks. REDUCE COSTS FOR SMALL AND LARGE BUSINESSES A shared, high performance network will reduce the cost of telephone, Internet, data back up, videoconferencing, and other business services through reduced cost of infrastructure and increased competition. Bozeman is competing for jobs and businesses with other communities in Montana and communities in other states that already have this kind of infrastructure in !!!!!!!!!!!Page 8 of 130 place--and most of those communities are aggressively promoting it as part of their economic development business attraction and retention strategies. DON’T WAIT As we have described elsewhere in the report, many other regions, some close by, are well ahead of Bozeman in their plans to acquire 21st century broadband infrastructure. There are numerous other county and multi-county broadband networks that have been operating successfully for years. New Hampshire FastRoads is a community- owned Gigabit network providing open access services to 22 towns in rural New Hampshire. Kansas City, Kansas and Kansas City, Missouri have construction underway in their Google partnership, which will connect hundreds of government locations, thousands of businesses, and tens of thousands of homes. Danville, Virginia has been successfully operating a municipal open access network since 2007, and the project generates enough revenue to fund a steady expansion. The City of Eagan, Minnesota has built 17 miles of Gigabit ﬁber that passes most of the primary business and commercial areas of the city, and the network was a key fac- tor in attracting a major data center to Eagan. More than 135 other communities in the United States have operating networks or have substantial network construction underway. SHORT TERM GOALS A variety of short term goals should be considered as next steps in this effort. Short Term Goals Description Continue the Current Broadband Initiative The current group of public and private stakeholders and interested parties should continue development of this initiative. Select a Governance and Ownership Model Answering the question, “What entity will own and manage the infrastructure?” is an essential ﬁrst step. Commitment from Key Stakeholders to Support the Effort Support from elected officials and key stakeholders like the K12 schools, MSU, and local health care providers is essential to success. Consistent Message and Coordinated Public Awareness If a decision to move forward is made by the City, stakeholders, and interested parties, a consistent message about the beneﬁts and advantages will be critical to gain public support. !!!!!!!!!!!Page 9 of 130 Short Term Goals Description Create a Public/Private Partnership Modest City investments in basic infrastructure create an ideal opportunity to form a public/private partnership with existing local and regional providers. Continue to Develop a Common Fiber Overlay Plan and Open Ditch Policy Conduit and handholes should be included where appropriate in all new public and private construction. Shared trenching should be vigorously pursued. Coordinate Broadband Infrastructure Improvements with Public Safety Spending Coordinate upgrades to public safety communications systems with planned ﬁber and wireless improvements to reduce the cost and improve the quality of public safety voice/data traffic. CONTINUE THE CURRENT BROADBAND INITIATIVE The current group of City officials, private sector business people, and institutional stakeholders should continue to meet regularly, identify key decision points, recommend an overall strategy, and adopt an action plan for next steps. SELECT A GOVERNANCE AND OWNERSHIP MODEL We recommend that the City limit its initial investment to passive infrastructure, which will keep the overall management of the infrastructure relatively simple. A separate entity ﬁrmly vested with community oversight would provide ﬁscal and operational management of the network. COMMITMENT FROM KEY STAKEHOLDERS TO SUPPORT THE EFFORT City support may consist of investments in conduit and other passive infrastructure that can be leased out on an open access basis, commitments to buy services once the network is constructed, and commitments to provide expedited rights-of-way and construction permit processing. The commitment to buy services for City facilities and agencies is particularly important for ﬁnancial sustainability and stability over time. As more private sector businesses are connected, government purchases of services have less ﬁnancial impact on the enterprise, but early commitments from anchor tenant customers can ease ﬁnancing (both for public and private ownership) and can help attract service providers. K12 school commitments to buy services on the network are particularly important, as K12 schools are often the single largest public or private purchaser of broadband services in a locality. During the planning stages of ﬁrst phase of development, it is also important that local businesses consider the result of purchasing or renewing long term broadband and telecom service contracts with providers. Large “anchor tenant” customers for the new network can use their purchasing power to encourage local incumbent and competitive service providers to amend their contracts to allow a graceful transition to the new open network. !!!!!!!!!!!Page 10 of 130 CONSISTENT MESSAGE AND COORDINATED PUBLIC AWARENESS Public support for the project will be important to the long term success of the effort. All parties involved in the effort must be able to address key talking points clearly, succinctly, and consistently to avoid confusion and negative rumors. Incumbents may embark on extremely negative and mis-leading public relations campaigns that seem to suggest a wide range of poor outcomes to such an effort. Citizens may assume that taxes will be increased to support the effort. A well-managed public awareness campaign that includes helping elected and appointed officials both understand and discuss key parts of the project will be very important. CREATE A PUBLIC/PRIVATE PARTNERSHIP The new community-owned entity should partner with local and regional private sector providers to avoid competing with the private sector and to limit the size and scope of City government involvement. CONTINUE TO DEVELOP A COMMON FIBER OVERLAY PLAN AND OPEN DITCH POLICY A ﬁber overlay plan is an essential part of any next steps. The City should continue to develop its current work efforts to identify desired ﬁber routes and connected facilities, any road reconstruction or repairs, water or sewer expansion, and any other civic construction or utility work should be compared to the overlay plan to determine if the new work is on a desired ﬁber route. If it is, funds should be budgeted during the planning phase of the effort to include adding duct and ﬁber along that route. The Public Works Department should update new project guidelines and checklists to encourage both public and private development projects to include conduit, duct, and handholes where appropriate, just as private developers routinely provide shared infrastructure like roads, sidewalks, water and sewer. The City Public Works Department should be trained to install duct so that incremental build opportunities can be pursued at least cost. COORDINATE BROADBAND INFRASTRUCTURE IMPROVEMENTS WITH PUBLIC SAFETY SPENDING Public safety can beneﬁt substantially from cost sharing with a community-owned network. Fiber can be reserved speciﬁcally for public safety use so that those agencies have secure data transmission with no information co-mingled with commercial and residential data. The public safety radio network can be enhanced by running ﬁber (over time) to all repeater towers, improving the quality of voice transmission and potentially reducing the overall number of towers and repeaters needed. !!!!!!!!!!!Page 11 of 130 The Economic Impact of Broadband Over the next thirty years, the businesses, residents, and institutions of Bozeman will spend over one billion dollars on telecommunications services--in today’s dollars, unadjusted for inﬂation and unadjusted for price increases. Some analysts believe that the average household bill for services delivered via broadband may double in the next ten years, which would make the thirty year projection easily reach $2 billion. Currently, there exists a substantial opportunity to capture more of these funds and direct them towards greater job creation and business opportunities for the city. Numerous studies indicate that demand for bandwidth is doubling every two years, and that the FCC expects that the typical bandwidth needed by businesses and residents in 2015 (in just one year) will exceed 50 megabits. Indeed, the New Hampshire FastRoads community-owned ﬁber network is ﬁnding that their 50 meg residential Internet service is extremely popular...in rural and remote New Hampshire. Community livelihood and the economic future in the Bozeman area is dependent upon the availability of affordable high speed broadband services--at the bandwidths that will be needed to conduct business in the future (“big” broadband), not at today’s “little” broadband speeds. Businesses large and small are already heavy users of the Internet, and their bandwidth needs will increase dramatically as two business trends accelerate: Business travel costs are increasing rapidly as the cost of fossil fuel increases. Both the cost of ordinary commuting to the workplace is increasing as well as the cost of out of town business travel by air. Businesses are already investing heavily in HD quality business videoconferencing systems, and will make more use of them to reduce travel costs. These HD quality business videoconferencing systems require dramatic increases in bandwidth that are not affordable or in most cases not even available in certain areas of Bozeman. The market exists in Bozeman to implement the infrastructure to support resources like HD quality business videoconferencing systems considering the largest business sector in the area comes from professional business services. In many states and the federal government, the employment commission encourages businesses to allow employees to work from home to help with work-life balance and reduce overhead costs in the office, but the broadband infrastructure must be in place. High performance broadband could have positive effects: it could enable more people to work from home, it could enable more home-based businesses, and it could attract more businesses to the city. More and more workers and business people are working from home, either on a part time or a full time basis. New work from home job opportunities are growing rapidly, but most of those jobs require a wired Internet and a wired phone connection to qualify. Many corporate and business employees will be seeking permission to work more from home (e.g. one or two days per week) to reduce travel costs. Some major businesses in other parts of the U.S. are already actively planning to have 20% of their workforce work full time from home to reduce employee travel costs and office energy costs. Telework initiatives are becoming more widespread !!!!!!!!!!!Page 12 of 130 throughout each state, where states Corporate employees working from home require high bandwidth services to be connected to the office network and to use corporate videoconferencing systems. These corporate network services will require 35-50 megabit connections within ﬁve years. This report presents the information that Bozeman needs to make an informed decision about strategic investments in modern broadband infrastructure. For the city, business retention and new business attraction can only be accomplished if the area has the right telecommunications infrastructure that will enable area businesses to compete in the global economy. City of Bozeman 30 Year Telecom Expenditure AnalysisCity of Bozeman 30 Year Telecom Expenditure AnalysisCity of Bozeman 30 Year Telecom Expenditure AnalysisCity of Bozeman 30 Year Telecom Expenditure Analysis Households still on dial-up Households with “little” broadband cable modem/DSL/wireless Households with no Internet Total households 16,66216,66216,662 Total businesses 2,8452,8452,845 Household Percentage 3%84%13% Number of households 500 13,998 2,166 Average monthly telecom expenditures Local phone: $25 Long distance: $25 Cable/satellite TV: $65 Dial up Internet: $20 Local phone: $25 Long distance: $25 Cable/satellite TV: $75 Broadband Internet: $45 Local phone: $25 Long distance: $25 Cable/satellite TV: $65 Annual cost/household $1,620 $2,040 $1,380 30 year expenditure $24,293,196 $856,662,067 $89,674,884 Total residential expenditures $970,630,147$970,630,147$970,630,147 Total expenditures1 $1,116,224,670$1,116,224,670$1,116,224,670 Broadband is not a silver bullet for communities. Broadband investments need to be tied to a wider set of community and economic development strategies that help make communities engaging and interesting places to locate and run businesses, and to make communities a vi- brant and safe place to live. Communities that have made broadband investments without taking the time to identify a broader set of goals and expected outcomes have usually been disappointed when broadband investments have not had much of an impact. However, it is clear that broadband investments are critical for economic viability. In 2008, U.S. industries invested over $455 billion dollars in telecom and technology investment, including over $60 billion in broadband. A 2011 report from the McKinsey Global Institute studied the Internet’s growing impact on the economy. The report found that the Internet accounted for 21% of GDP growth in the last ﬁve years for mature countries, and this number is only ex- pected to climb higher. !!!!!!!!!!!Page 13 of 130 $8 trillion dollars is exchanged through e-commerce annually. Community investments in infrastructure will accelerate the availability of broadband options within the community, especially in the business and retail sector. It is important to note that the government entities would not sell services to the public and would not compete with pri- vate sector ﬁrms. Instead, private sector ﬁrms, including existing telecom providers, would use the new infrastructure to compete with each other. Service providers using the network would pay a small portion of revenue to the network for the use of the infrastructure. Commuting costs due to energy increases will encourage more work from home and business from home activities. Traffic and commuting patterns will change, and these shifts in com- muting patterns may suggest different budgeting strategies for community infrastructure im- provements and investments. As fuel prices continue to rise, a slow but steady increase in the number of home-based jobs and businesses is being driven by the corresponding increase in the cost of commuting. But home-based workers and businesses will require more than the current residential broadband services; business class broadband will become increasingly im- portant as the area’s small towns, neighborhoods, and rural roads transition to daytime busi- ness districts. Residents and businesses are increasingly content creators, not just content consumers. This shift in locus of content development also means that both residential neighborhoods and existing commercial areas of the region require much higher performance networks with symmetric bandwidth to accommodate content creation. Demographic changes must be considered; if the city wants to attract and retain young peo- ple, consider the following data from a Fiber To The Home Council report (March, 2013): Among young people under 35, 54% of males are “very interested” in advanced broad- band services, and 44% of females are “very interested” in advanced broadband serv- ices. In this age group, over 65% are “very interested” in working from home. In the over 54 age group, one third of men and women are interested in advanced broadband services, and over half want to use HD video calls. 11% of ﬁber to the home users have a home-based business. Fiber service is ranked as the number one factor inﬂuencing a home purchase if the buyer already has ﬁber at their current residence. Fiber is ranked as the number two home buying factor if they do not have ﬁber service now. Fiber connected homes are perceived as being worth $5,000 to $6,000 more than an equivalent home without ﬁber. Because of the increase in home-based businesses due to ﬁber availability, ﬁber can create as much as $1.1 million in new business revenue to the community for every 1,000 homes passed by ﬁber. World class broadband infrastructure will be necessary to maintain the city’s attractiveness as a great place to live. !!!!!!!!!!!Page 14 of 130 When local governments undertake a study of broadband infrastructure, a key question should be: “What is the beneﬁt if government invests in broadband infrastructure?” And the inverse question should also be asked: “What happens if we don’t make strategic broadband investments?” OUTCOMES OF STRATEGIC LOCAL GOVERNMENT INVESTMENT OUTCOMES OF LEAVING IT ENTIRELY TO THE PRIVATE SECTOR Increased competitiveness with other cities and regions that have made broadband investments and have driven down the cost of Internet and voice services for businesses and residents. Communities with shared broadband infrastruc- ture are seeing increased economic development activity and increased business attraction suc- cess. Better prepared to attract businesses and jobs to the area. The city is at an economic disadvantage without a strategy to ensure than affordable high speed broadband is in place as a business attraction and business retention tool. Cities and counties that have made investments have seen the cost of telecom services sharply reduced, keeping more money in the community and freeing up business funds for expansion and jobs creation. Residents and businesses will continue to pay more for voice, TV, Internet, and other broad- band services. A long term strategy of “ﬁber everywhere” gives the city better educational opportunities and improved access to jobs. Fiber service in the city will also attract entrepreneurs and business people who want to work from home. The city may see less population growth, loss of younger workers and families, and diminished educational opportunities. Aggregation of the marketplace for telecom services via shared community infrastructure attracts more providers and helps keep prices for broadband services lower. Private sector providers will continue to “Bal- kanize” the city, with higher prices and more limited bandwidth options because of limited competition. This report assesses and analyzes current conditions and future potential of broadband in the City of Bozeman so that the City can take advantage of the emerging business and residential growth within the area. This can only be accomplished if the city has the right telecommuni- cations infrastructure that will support the needs of existing businesses and also attract new businesses. !!!!!!!!!!!Page 15 of 130 What is Broadband? There is much confusion about the “true” deﬁnition of broadband. From the perspective of economic development, there can be no upper limit on the deﬁnition of broadband. Saying that broadband (as an example) is 5 megabits/second of bandwidth or 10 megabits/second is to immediately tell businesses in the city that there will be structural limits on their ability to do business in the future–it is dictating the size of truck that can be used to deliver goods and services. Here is the only appropriate deﬁnition of broadband: Broadband is whatever amount of bandwidth is needed to support a business’ ability to compete in the global economy. Broadband is a community and economic development issue, not a technology issue. The essential question is not, “What system should we buy?” or “Is wireless better or cheaper than ﬁber?” Instead, the question is: “What do Bozeman businesses and residents need to be able to compete globally over the next thirty years?” In short, Bozeman today has “little broadband” in the form of DSL and cable modem service, along with a very limited amount of “big broadband” in the form of ﬁber to a few businesses and institutions. If Bozeman is to make investments in broadband and telecommunications infrastructure, it is absolutely critical that those investments are able to scale gracefully to meet business and economic development needs for decades. This drives the solution towards an integrated ﬁber and wireless system, rather than a wireless only service orientation. Wireless is able to provide basic Internet access needs, but is not able to support advanced video and multimedia services. Some off the shelf business videoconferencing systems in use today require a minimum of 50 megabits of bandwidth--beyond the capabilities of any affordable wireless system (cellular data networks are approaching this level of bandwidth at off-peak times, but with punishingly expensive bandwidth caps). Two key concepts that should drive community investments in telecom are: “Broadband” is not the Internet Bandwidth is not a fixed number Broadband and “the Internet” are often used interchangeably, but this has led to much confusion. Broadband refers to a delivery system, while “the Internet” is just one of many services that can be carried on a broadband network. The challenge for communities is to ensure that businesses and homes have a broadband network with sufficient bandwidth to deliver all the services that will be needed and expected within the next three to four years, including but not limited to “the Internet.” Bandwidth needs for the past decade have been growing by 25% to 50% per year, and show no sign of slowing. As computers and associated hardware (e.g. video cameras, audio equipment, !!!!!!!!!!!Page 16 of 130 VoIP phones) become more powerful and less expensive, new applications and services are continually emerging that drive demand for more bandwidth. The table below indicates the likely growth in bandwidth, based on current uses, emerging high end equipment, and research lab/university/government networks already deployed and in use. Lightpaths refer to placing multiple wavelengths (paths) of light on a single ﬁber. High end commercial equipment already in production is routinely placing 20+ lightpaths on a single ﬁber, with each lightpath capable of carrying data at gigabit speeds. This technology will move down to ordinary business and residential network equipment over the next ten to ﬁfteen years. Current ﬁber being installed will require only a relatively inexpensive equipment upgrade to increase carrying capacity over the same ﬁbers. From a report by the Information Technology and Innovation Foundation (March, 2009), listed below are the bandwidth requirements for services already commonly in use and for emerging services like telepresence business videoconferencing. Application/Service Upstream Bandwidth Requirement Downstream Bandwidth Re- quirement Total Combined Bandwidth Required Medium resolution videoconferencing 1.2 megabits 1.2 megabits 2.4 megabits Streaming video (720p)1.2 megabits 1.7 megabits Standard deﬁnition TV 4 megabits 4.25 megabits Basic HD videoconfer- encing (720p) 1.2 to 4 megabits 1.2 to 4 megabits 2 to 8 megabits Telepresence high reso- lution HD videoconfer- encing 5 megabits 5 megabits 10 megabits for 2 attendees, 15 meg for 3 attendees Video home security service 10 megabits 2.5 to 5 megabits HD digital television (1080p) 15 megabits 5 to 10 megabits Telepresence very high resolution HD videocon- ferencing (1080p) 15 megabits 15 megabits 30 megabits for 2 attendees, 45 mega- bits for 3 attendees 4K digital television 1 megabit 19 megabits 20 megabits Note that the business videoconferencing services all require symmetric bandwidth. This is a critically important issue, as current incumbent “little broadband” services like DSL and cable modem systems do not offer symmetric bandwidth (where the upstream and downstream bandwidth is equal). Using this information we can project what Bozeman homes and businesses will need in the coming years. !!!!!!!!!!!Page 17 of 130 Next 2-4 years Next decade Twenty years Small business needs (1-9 em- ployees) 10-25 megabits of symmetric band- width and 5-10 megabits of Internet access 100 megabits of symmetric bandwidth and 20-40 megabits of Internet access Gigabit+ symmetric bandwidth and 50 to 100 megabits of Internet ac- cess Medium-sized business needs (10-100 employ- ees) 50-100 megabits of symmetric band- width and 10-20 megabits of Internet access Gigabit symmetric bandwidth and 50 to 100 megabits of Internet access Multiple gigabit symmet- ric circuits and lightpaths and 100+ megabits of Internet access Large business needs (100-1000+ employees) Gigabit+ symmetric bandwidth and 100+ megabits of Internet access Multiple gigabit symmetric connec- tions and 250 to 500 megabits of Internet access Multiple gigabit symmet- ric circuits and lightpaths and 1 Gigabit+ of Inter- net access Residential needs 25-50 megabits of symmetric band- width and 4-8 megabits of Internet access 100 megabits of symmetric bandwidth and 20-30 megabits of Internet access A Gigabit symmetric circuit and/or lightpaths, with 50 to 100 megabits of Internet access EXISTING CONDITIONS Although the U.S. once led the way in the World Wide Web, the U.S. has now fallen to the 27th place among developed nations for broadband usage according to a report conducted by the OECD (Organization for Economic Co-operation and Development) in 2012. In addition, limited choices often force U.S. consumers to purchase slower bandwidth speeds at a higher cost as compared to other nations. However, increasing bandwidth speed at an affordable price point will be necessary to compete in a global economy. The speed of the bandwidth can have a signiﬁcant impact at the local, state, federal, and international level in regards to the standard of living and economic development. The Internet-enabled local and regional networks service the purpose of maintaining and creating jobs, facilitating telemedicine, improving education, ensuring public safety, and providing public services. Just within the past decade, the key purposes of the Internet were intended for basic use to hop onto the web. However, the Internet is now used for both play and for work. !!!!!!!!!!!Page 18 of 130 0 12.5 25 37.5 50 2003 2005 2007 2009 2011 2013 2015 2.3 5.6 8.8 12.1 15.3 18.5 21.8 25.0 28.2 31.5 34.7 37.9 41.2 Trend of Internet Speed from 2003 to 2015 Internet Speed (Mb/s)The steadily increasing use of the Web and other Internet-based services is creating the need for more bandwidth both at home and in business. Broadband bandwidth has increased from 300 Kb/s in 2003 to 25 Mb/s in 2010 according to a report conducted by Cisco. Despite the fact that global IP traffic has increased eightfold over the past 5 years, and will increase fourfold over the next ﬁve years, most U.S. Internet connections are not sufficient enough to support interactive home-based medical monitoring, multi-media distance learning, or to send and receive data to run a home-based business as denoted by the Cisco Visual Networking Index. In other words, the U.S. is average on the playing ﬁeld of ﬁrst generation broadband measures. The U.S. is an even weaker performer on providing reasonable prices for high and next- generation speeds. This translates into a signiﬁcant concern if business users of broadband want to compete globally for business concerns and enjoy the same connectivity capabilities as their competitors in a worldwide marketplace. Various predictions are forecasting steady future growth as the number of Internet-connected devices increases and users make more sophisticated use of those devices and the services available on those devices. By 2017, average global broadband speed will grow 3.5-fold, from 11.3 Mbps (2012) to 39 Mbps (2017) -- the City of Bozeman can’t rely on antiquated copper networks to support future bandwidth needs. Annual global IP traffic will reach the zettabyte threshold (966 exabytes or nearly 1 zettabyte) by the end of 2015. (A zettabyte is a measure of storage capacity. 1 zettabyte is approximately equal to a thousand exabytes or a billion terabytes.) The OECD (Organization for Economic Co-operation and Development) predicts that 2022, the average household with two teenage children will own roughly 50 Internet-connected devices, up from approximately 10 in 2014. This trend has been dubbed the “Internet of Things.” Seventy-eight percent (78%) of the data used by smartphones is accessed via WiFi rather than cellular networks, indicating that ubiquitous wireless access in downtown !!!!!!!!!!!Page 19 of 130 areas can be important to attracting shoppers and visitors. The "terabyte club" will reach 6 million by 2015. In 2015, there will be 6 million Internet households worldwide generating over a terabyte per month in Internet traffic, up from just a few hundred thousand in 2010. There will be over 20 million households generating half a terabyte per month in 2015. Global IP traffic has increased eightfold over the past 5 years, and will increase fourfold over the next 5 years. Overall, IP traffic will grow at a compound annual growth rate (CAGR) of 32 percent from 2010 to 2015. A growing amount of Internet traffic is originating with non-PC devices. In 2010, only 3 percent of Internet traffic originated with non-PC devices, but by 2015 the non-PC share of Internet traffic will grow to 15 percent. PC-originated traffic will grow at a CAGR of 33 percent, while TVs, tablets, smartphones, and machine-to- machine (M2M) modules will have growth rates of 101 percent, 216 percent, 144 per- cent, and 258 percent, respectively. Globally, video will be 73 percent of all Internet traffic (both business and consumer) by 2017, up from 60 percent in 2012. The sum of all forms of video (TV, video on de- mand [VoD], Internet, and P2P) will continue to be in the range of 80 and 90 percent of global consumer traffic by 2017. -- the City of Bozeman needs broadband infra- structure that will support current and future video uses, especially high-def business videoconferencing. Busy-hour traffic is growing more rapidly than average traffic. Busy-hour traffic will increase ﬁvefold by 2015, while average traffic will increase fourfold. During an aver- age hour in 2015, the traffic will be equivalent to 200 million people streaming high- deﬁnition video continuously. During the busy hour in 2015, the traffic will be equiva- lent to 500 million people streaming high-deﬁnition video continuously. Internet video is now 40 percent of consumer Internet traffic, and will reach 62 per- cent by the end of 2015, not including the amount of video exchanged through P2P ﬁle sharing. The sum of all forms of video (TV, video on demand [VoD], Internet, and P2P) will continue to be approximately 90 percent of global consumer traffic by 2015. The highest quality IP-based video streams today require six to twelve megabits/ second, but the emerging Ultra HD, designed to support the new 4K TVs, will require ﬁfteen to twenty megabits/second--per channel. If there are two people in a home watching two different channels at the same time, the base bandwidth requirement just to watch TV will be on the order of 40 megabits/second. !!!!!!!!!!!Page 20 of 130 Globally, mobile data traffic will increase 13-fold between 2012 and 2017. Mobile data traffic will grow at a CAGR of 66 percent between 2012 and 2017, reaching 11.2 exabytes per month by 2017. -- Fiber-enabled data backhaul services are critical to ensuring that mobile phone and data networks have enough capacity to support de- mand. Business IP traffic will grow at a CAGR of 24 percent from 2010 to 2015. Increased adoption of advanced video communications in the enterprise segment will cause business IP traffic to grow by a factor of 2.7 between 2010 and 2015. Business video conferencing will grow sixfold over the forecast period. Business video- conferencing traffic is growing signiﬁcantly faster than overall business IP traffic, at a CAGR of 41 percent from 2010-2015. NEXT GENERATION CONNECTIVITY “Next generation” is the term used to describe future planning for the next step in network connectivity and infrastructure. There seems to be an emphasis on deploying ﬁber-to-the-home (FTTH). But why? By pulling ﬁber deeper into the neighborhood and providing greater access to connectivity, this allows the infrastructure to be in place to accommodate future communication needs, capacities, and innovations. Because of the U.S. demographic bulge that occurred during the baby boom after World War II caused exurban migration, the U.S. is currently the only country where ﬁber is being deployed in largely suburban areas with single family homes. In countries like Japan and Korea, ﬁber to the apartment is widely available, in part because the cost of delivering ﬁber to a high rise apartment building that might have 500 subscribers is much lower than the build cost of ﬁber to 500 single family homes in a sub- division. Next generation broadband reaps substantial beneﬁts; there are several key beneﬁts of “Next-Generation Broadband”: Dramatically faster ﬁle transfer speeds for both uploads and downloads The ability to transmit streaming video, transforming the Internet into a far more vis- ual medium Means to engage in true-real time collaboration The ability to use many applications simultaneously Ability to maintain more ﬂexible work schedules by being able to work from home on a part time or full time basis The ability to obtain health-related services for an occasional illness and/or long term medical services for chronic illnesses. !!!!!!!!!!!Page 21 of 130 Clearly, consumers have a strong interest in a visual medium from when and wherever they are. YouTube is the second most popular search engine after Google, which demonstrates the need to support the infrastructure to transmit streaming video. In addition to video streaming, true-real time collaboration also provides an effective way for people to interact from wherever they are. People can engage in a two-way, real-time collaboration, so that fruitful, visual conversations can be held between friends, family, business associates from the state, country, or internationally. Because of ﬁber networks, employees have the capabilities of working from their home. Findings suggest that if all Americans had ﬁber to the home, this would lead to a 5 percent reduction in gasoline use, a 4 percent reduction in carbon dioxide emissions, $5 billion in lower road expenditures, and 1.5 billion commute hours recaptured. SIGNIFICANCE OF BIG BANDWIDTH FOR THE FUTURE According to the 2009 report from the World Bank on information and communications technologies, for every ten additional broadband subscribers out of 100 inhabitants are correlated in high income countries with GDP growth increases of 1.21%. PROSPERITY As suggested from the statistic above, the Internet generates growth. In more than a handful of countries, GDP growth doubled to over 21% due to the Internet. Although some jobs have been eliminated due to the emergence of the Internet, nearly 1.2 million jobs have been created over the past 15 years from the Internet. The McKinsey’s global SME survey suggests that 2.6 jobs were created for every one destroyed. HEALTH CARE DELIVERY According to “The 2008 State New Economy Index” healthcare can be signiﬁcantly improved in the future through greater use of information technology and connectivity to the web. Healthcare costs can potentially be cut by $80 billion annually. The cost of health care continues to rise annually. For instance, health care as a share of U.S. GDP has almost doubled from 8.8 percent to 15.3 percent in 2005. One aspect of health care that is gaining steam is electronic prescribing. Electronic prescribing cuts medical transaction costs by eliminating the need for conﬁrmation phone calls and faxes and reduces the chance of health risks due to prescription delays. This is a particularly useful asset for communities in rural areas who do not have convenient access to medical assistance. GOVERNMENT AND CIVIC LIFE The term E-Government refers to networked information technologies online to serve constituents. The Internet cuts costs for many state governments from reducing the paper trail to expediting services through the Web like renewing drivers’ licenses and paying taxes. Furthermore, E-government will become a setting for online based discussions between constituents and bureaucrats. This allows for greater transparency in hopes of garnering a better !!!!!!!!!!!Page 22 of 130 perception of how government functions. More local and state governments and the federal government are attempting to involve constituents through webinars, blogs, wikis, and videos. EDUCATION Students beneﬁt greatly through the use of computers and Internet. Nearly every public school in America has access to the Internet. In 2007, there were 180,000 more instructional computers in the schools than in 2006. Students who attend schools without access to computers and the Internet may be ill prepared for the work place. The prevailing use of information technologies in not only the United States, but also globally, is a clear indicator that future prosperity is in the hands of students who are able to understand and use the pertinent tools. USE TRENDS AND SERVICE NEEDS ANALYSIS Mark Peterson, a Professor of Community and Economic Development at the University of Arkansas who studies the impact of broadband access and affordability on rural communities, wrote recently, “Broadband connectivity is not the infrastructure of the future, it is the infrastructure of the present.” Bozeman faces a challenge in economic development infrastructure with primarily “little broadband” (i.e. DSL, wireless, and cable services) when many communities, regions, and countries have already made the decision to focus resources on the development of “big broadband,” which is typically ﬁber with a minimum capacity of 100 megabits or Gigabit to the premises. A third of IBM employees work from home at least part time, and the company has reported annual savings of $110 million. Australia’s government is converting the entire telecommunications infrastructure for the country to an open access system by buying a major portion of Telstra assets. Tel- stra, which is currently the country’s primary incumbent telecom provider, will become a service provider on the new open network. In a 2013 report to the Fiber To The Home Council, Render Research and Consult- ing reported that ﬁber to the premises adds $5000 to $6000 to the sales price of the house. Fiber to the home users say they are able to work from home more often, averaging 7.3 workdays per month, reducing their carbon footprint and decreasing wear and tear (and maintenance) on roads. About 13% of homes in the U.S. had been passed by ﬁber by 2012. Nationally, less than 10% of homes have no access to any kind of broadband service, but in the city, more than 13% of homes still have no broadband access, or nearly 50% higher than the national average. In its March, 2009 report, the ITIF (Information Technology & Innovation Foundation) listed some of the next generation services and applications enabled by high performance, affordable !!!!!!!!!!!Page 23 of 130 broadband. The table on the next page lists these and other services that all represent broadband-enabled applications and services that must be available in Bozeman if it is to remain economically viable. Residential and Business Videoconferencing Residential and Business IP TV (Internet Protocol TV) Residential and Business HD streaming video Residential and Business Ultra hi-def (BluRay) video streaming Residential and Business Video on demand (e.g. Netﬂix) Residential and Business Place-shifted video Residential and Business Cloud computing services Residential and Business Online and cloud-based gaming Residential and Business Smart homes, buildings, and appliances, including smart electric meters, AMR (automated meter reading), and AMI (advanced metering infrastruc- ture) Residential and Business Remote computer aided design (CAD) Residential and Business Work from home jobs Residential and Business Business from home Residential and Business 3D graphic rendering and CGI server farms Residential and Business Remote network management and managed services Residential and Business Virtual collaboration spaces (e.g. enhanced GoToMeeting, Webex style serv- ices) Public Safety Intelligent transportation applications (smart road systems) Public Safety Public safety and ﬁrst responder networks Public Safety Emergency dispatch and coordinationPublic Safety Webcast agency meetings (e.g. virtual meetings) Public Safety Online training for ﬁrst responders, ﬁre, and rescue Society Broadcast of local sports events Society Videoconferencing of community and town hall meetings for wider partici- pationSociety Wider availability of nonproﬁt and community organization services !!!!!!!!!!!Page 24 of 130 Health Care Teleconsultations Health Care Telepathology Health Care Telesurgery Health Care Remote patient monitoringHealth Care Remote diagnosis Health Care Remote medical imaging Health Care Grid computing for medical research Education and Research Distance education Education and Research Virtual classrooms Education and Research Remote instrumentation Education and Research Multi-campus collaborationEducation and Research Digital content repositories and distribution (digital libraries) Education and Research Data visualization Education and Research Virtual laboratories Education and Research Grid computing for academic research When analyzing future service needs, it is important to take into account ALL serv- ices that may be delivered over a broadband connection. As we noted in the previous section, “broadband” is not a service--it is a delivery medium. If we think about broadband using a roads analogy, broadband is the road, not the trucks that use the road. Internet access is a service delivered by a broadband road system, and that Internet service is just one of many services that are in demand. Today, congestion on broadband networks is not due just to increased use of email and Web surﬁng, but many other services. As of 2012, Americans were watching more than 10 billion videos per month over the Internet. Cisco has said that by 2015 more than one million video minutes will travel across the Internet every second. This means that current DSL, wireless, and cable modem services are completely in- adequate for future needs. Current DSL offerings are in the range of 1 megabit to 3 megabits for most residential users, 3 megabits to 5 megabits for business DSL users, and there are severe distance limitations on DSL. Higher bandwidth is possible, but as the DSL bandwidth goes up, the distance it can be delivered goes down. Current wireless offerings are in the range of 1/2 megabit to 3 megabits, and WiMax services are only be able to deliver 4-8 megabits to individual customers. Some wire- less providers are rolling out 10-15 megabit services, but wireless does not scale up well with respect to cost. As bandwidth increases, the cost of the equipment also in- creases, and even a 15 megabit service is well short of the FCC projections of the need for 50 megabits of bandwidth in the near term. Wireless performance and capacity is heavily dependent upon backhaul (the local connection to the provider’s core net- !!!!!!!!!!!Page 25 of 130 work); if this connection is also wireless, the bandwidth available at the access point is shared among all users, even if the rated capacity of an individual connection is 15 megabits. In other words, if the backhaul capacity is 100 megabits, and twenty local users are sharing that capacity, actual bandwidth available to any single user may be much lower than 15 megabits. If all the users are trying to watch video at the same time (not uncommon in early evening), performance can suffer drastically. Across the U.S., current average bandwidth for cable modem services is typically 10 to 20 megabits, with cable companies promising “up to...” twenty or thirty megabits. It is important to note that cable providers make heavy use of the phrase “up to” in their advertising, and it is not unusual to see ads promoting cable modem speeds of “up to 30 megabits.” However, that amount of bandwidth is shared among many users (often 200 or more) in a neighborhood, which results in much lower average speeds, and dur- ing peak use times in residential areas, the actual bandwidth available to a single household may be less than one megabit. The challenge for Bozeman is to ensure that the businesses, residents, and institutions in the community have a telecommunications infrastructure in place that will be able to handle the 50x bandwidth increase projected by the FCC (which is based on many years of real world data). At a recent broadband conference, a talk by a DirecTV official provided additional insight into residential bandwidth needs. The DirecTV speaker noted that one of their biggest complaints is that the company does not have enough HD format programming. He went on to note that a single channel of “standard” HD content uses 10 megabits of bandwidth when delivered via IP-TV, and a live event like a race or sporting event (e.g. football) requires 15 megabits of bandwidth. The emerging HD 4K video standard requires 19 megabits per channel--far beyond the ability of existing wireless and copper-based broadband services to deliver with any quality (or at all). DirecTV is already delivering video programming to end users using Internet-based IP-TV formats, and noted that many buildings and homes do not have the internal cabling to support the IP-TV bandwidth needs. He also indicated that their early IP-TV users cannot tell the difference between IP-TV delivery of video and traditional cable/satellite delivery. In 1993, the year that the Blacksburg Electronic Village began offering the ﬁrst residential Internet access in the world, the average connection speed was 14,400 bits per second. At the end of 2007, the average bandwidth to the home is ﬁfty times that for DSL service (768,000 bits per second), and over 70 times that for the typical cable modem connection (about 1,000,000 bits per second). DSL speeds have ﬂattened out because DSL capacity has ﬂattened out, not because demand has diminished. Distance learning, entertainment, and video conferencing are three major applications of internet video. Distance learning from home with live video feeds will require high performance 2+ megabit connections in the near term (next 2-4 years), and over the next 4 to 7 years, there will be many distance learning courses that will incorporate live HD two-way video !!!!!!!!!!!Page 26 of 130 feeds, enabling students to participate in classroom discussions at a much higher quality level. Distance learning could be an important home-based application for workforce training and retraining. Some Idaho community colleges offer “hybrid courses” where a student attends several class sessions at the college and the remaining sessions online from their home, the library, or another location. Entertainment will also drive bandwidth demand from the home, and the popularity of video sites like YouTube and Netﬂix provide a good indication of the long term demand for video in many forms, including: Live feeds (e.g. live TV shows, sports coverage, and live news reports). Video on demand (TV shows available for viewing at any time, rather than at sched- uled times). Movies on demand (instead of going to the video store). Two way video conversations (family, friends). Video stored on home computers and distributed across the Internet (e.g. videos of grandchildren, family activities). Local video content streamed live or from a server (e.g. high school football games, other sporting events, council meetings, other civic activities). Most homes in Bozeman have multiple TVs, meaning that a minimum of 25 megabits of bandwidth is required just to have both televisions on and tuned to two different channels. If a third person in the home is attending an evening distance learning course that uses HD video, the total bandwidth need would be more than 40 megabits. Another source of increased demand, alluded to above, is multi-tasking. Surﬁng the Web while watching TV is becoming commonplace. With the proliferation of smart-phones, tablets, and laptop computers, the amount of potential users is also increasing. A recent study collected data showing that the average U.S. household has an average of 10 Internet-enabled devices: “U.S. homes now have more than half a billion devices connected to the Internet, according to a study by the NPD Group. Furthermore, the overall number of connected devices per household, according to a 2014 OECD study, is 10. This is more than three times the average number of people per household. The proliferation of connected devices is primarily fueled by tablet sales....” SERVICE AND GAP ANALYSIS BUSINESS BANDWIDTH NEEDS The next table shows bandwidth consumption for several types of businesses and a projection of the bandwidth needed 5 and 10 years out. The cost of fuel is already affecting business travel decisions, and more and more businesses will invest in HD quality business videoconference !!!!!!!!!!!Page 27 of 130 systems to reduce the need for travel. These HD systems require substantial bandwidth; a two way HD video conference requires 20-25 megabits during the conference, and a three way conference requires 30-35 megabits during the conference. As more workers try to reduce the cost of driving to and from work by working part or full time from home, the business location must provide network access (Virtual Private Network, or VPN) to the employees working from home. These home-based workers will make extensive use of videoconferencing to attend routine office meetings remotely and to enhance communications with co-workers, including videoconferences with other home-based workers in the company. A VPN network providing remote access to just two or three home-based employees could require 50 megabits of bandwidth during normal work hours. Large BusinessLarge Business Small BusinessSmall Business Home Based Worker Home Based Worker Business From Home Business From Home Description A larger business with about 50 workstations. A larger business with about 50 workstations. A small business with 10 to 15 employees, and 7- 10 workstations. A small business with 10 to 15 employees, and 7- 10 workstations. A single em- ployee working at home for his/her company. A single em- ployee working at home for his/her company. A home business with one or two employees working at home. A home business with one or two employees working at home. Concurrent Use Mbps Concurrent Use Mbps Concurrent Use Mbps Concurrent Use Mbps Telephone 20 1.28 5 0.32 1 0.064 1 0.064 TV 0 0 0 0 HDTV 0 0 0 0 Credit Card Validation 4 4 1 1 0 0 Security System 1 0.25 1 0.25 1 0.25 1 0.25 Internet 20 30 7 10.5 1 1.5 1 1.5 VPN Connection 5 25 0 1 5 0 Data Backup 5 7.5 1 1.5 1 1.5 1 1.5 Web Hosting 1 2 0 0 0 Workforce Training (online classes)2 20 1 10 0 0 1 10 HD Videoconferenc- ing 10 100 2 20 1 10 1 10 Telecommuting work- ers 5 15 2 6 0 0 0 0 Totals 205.0 49.6 18.3 23.3 5 years from now (megabits)615615 149149 5555 7070 10 years from now (megabits)18451845 446446 165165 210210 RESIDENTIAL BANDWIDTH NEEDS The table below depicts the bandwidth needed for typical residential services which are available now or will be available in the near future. In a next generation network all services will be delivered over a single network infrastructure which will require an access network that !!!!!!!!!!!Page 28 of 130 can support providing most services to most consumers simultaneously. Today’s shared networks (cable and wireless in particular) rely on the “bursty” nature of traffic to provide services to end users. If all end users were consuming their “advertised” bandwidth today’s cable and DSL networks would grind to a halt. In fact, they already are; some cable providers have begun to receive heavy criticism for undocumented manipulation of data traffic. Existing cable modem network users are overwhelming the digital cable networks that were upgraded as little as three or four years ago, and the ﬁrms have had to artiﬁcially reduce the bandwidth available for certain kinds of high bandwidth services (e.g. peer to peer ﬁle sharing). Some cable providers have even run into capacity issues with the TV portion of their networks, and some consumers have observed that some HD TV channels have been so highly compressed that picture quality has been noticeably degraded when compared to the same channel delivered by satellite. Residential Day- time Residential Day- time Early EveningEarly Evening Evening and Late Night Evening and Late Night Snow DaySnow Day Description Intermittent Televi- sion and Internet use across a small percentage of households. Intermittent Televi- sion and Internet use across a small percentage of households. Increased televi- sion, telephone, and Internet use as children arrive home from school and em- ployees from work. Use of other services increases. Increased televi- sion, telephone, and Internet use as children arrive home from school and em- ployees from work. Use of other services increases. Peak television and Internet use. Multiple TV’s are on, phone and computer being used. Peak television and Internet use. Multiple TV’s are on, phone and computer being used. On top of typical daytime traffic children are home from school, and many employees are home working. On top of typical daytime traffic children are home from school, and many employees are home working. Concurrent Use Mbps Concurrent Use Mbps Concurrent Use Mbps Concurrent Use Mbps Telephone 1 0.064 1 0.06 1 0.06 1 0.064 Standard Deﬁnition TV 1 2.5 1 2.5 1 2.5 1 2.5 HD TV 1 4 2 8 2 8 3 12 Security System 1 0.25 1 0.25 1 0.25 1 0.25 Internet 1 1.5 1 1.5 2 3 3 4.5 Online Gaming 0.25 0.5 1 1 VPN Connection 0 0 1 2 1 2 2 4 Data Backup 0 1 5 1 5 1 0 Telehealth (subscriber)1 4 1 4 1 4 0 0 Distance Learning / Workforce Training 0 1 10 1 10 2 20 HD Videoconferencing 0 0 0 1 14 Totals 12.6 33.8 35.8 58.3 5 years from now (megabits)3838 101101 107107 175175 10 years from now (megabits)113113 304304 322322 525525 The table above is designed to show bandwidth consumption in several scenarios. Network design requires a system than can meet peak demand across the entire network, meaning the !!!!!!!!!!!Page 29 of 130 network must be able to deliver peak bandwidth demand to a majority of households at the same time. Super Bowl Sunday is a typical example of a day when a majority of households may be watching a video at the same time. Political debates, season ﬁnales of popular shows, and even a typical Saturday afternoon during football season may see many households trying to access multiple channels of video simultaneously. This table shows the severe gap between current DSL, wireless, and cable modem options in the City of Bozeman and projected future demand. LOCAL PRICING DATA Provider Bozeman Butte Boulder, CO Tucson, AZ Century Link Residential Internet only, all speeds ranging from 1.5 to 40 Mbps = $29.95 per month Available speeds varies throughout the city depending on location. Slowest speed was 3 Mbps at 1001 W. Oak St.. Fastest speed found was 40 Mbps at 772 Rosa Way Bundled (Inet, TV, Phone) Starting packages = $99.94 Business Internet only, 10 Mbps -$29.99 per month Internet & Phone Bundled, $74.99 per month for speeds up to 20 Mbps Call for pricing on higher speeds. Residential Internet only, all speeds ranging from 1.5 to 40 Mbps = $29.95 per month Available speeds varies throughout the city depending on location. Of test locations fastest speed was 12 Mbps and slowest speed was 1.5 mbps. Bundled (Inet, TV, Phone) Starting packages = $99.94 Business Internet only, 10 Mbps -$29.99 per month Internet & Phone Bundled, $74.99 per month for speeds up to 20 Mbps Call for pricing on higher speeds Residential Internet only, all speeds ranging from 1.5 to 40 Mbps = $29.95 per month Available speeds varies throughout the city depending on location. Of test locations fastest speed was 40 Mbps. Bundled (Inet, TV, Phone) Starting packages = $99.94 Business Internet only, 10 Mbps -$29.99 per month Internet & Phone Bundled, $74.99 per month for speeds up to 20 Mbps Call for pricing on higher speeds Residential Internet only, all speeds ranging from 1.5 to 40 Mbps = $29.95 per month Available speeds varies throughout the city depending on location. Of test locations fastest speed was 40 Mbps. Bundled (Inet, TV, Phone) Starting packages = $99.94 Business Internet only, 10 Mbps -$29.99 per month Internet & Phone Bundled, $74.99 per month for speeds up to 20 Mbps Call for pricing on higher speeds !!!!!!!!!!!Page 30 of 130 Provider Bozeman Butte Boulder, CO Tucson, AZ Charter Residential Internet up to 30 Mbps ranges from $20 to $29.99 per month depending on the TV package Business Packages start at $55 per month. Speeds up to 60 Mbps. Call for pricing. Residential Internet up to 30 Mbps ranges from $20 to $29.99 per month depending on the TV package Business Packages start at $55 per month. Speeds up to 60 Mbps. Call for pricing. N/A N/A Comcast N/A N/A Residential Internet up to 25 Mbps = $29.99 per month Internet & Local TV = $39.99 per month Internet @ 50 Mbps + Local TV = $44.99 per month Internet @ 50 Mbps + TV channels + Phone = Packages start at $99 per month N/A Cox N/A N/A N/A Residential Bundled Services (INet, TV & Phone monthly) 50 Mbps = $99.99 100 Mbps = $119.99 150 Mbps = $149.99 Business Cable 5 Mbps to 150 Mbps starting at $74 per month. Call for pricing. Optical Service up to 10 Gig – Call for pric- ing !!!!!!!!!!!Page 31 of 130 Provider BOZEMAN BUTTE BOULDER, CO TUCSON, AZ Little Apple Basic – 512K = $45 per month Standard -1.5 Mbps = $65 per month Premium – 3 Mbps = $99 per month N/A N/A N/A Integra Business Service = Ethernet over Copper. No published pricing. Business Serv- ice = Ethernet over Copper. No published pricing. Business Service – Fiber to the prem- ise where avail- able. No pub- lished pricing. Global Net Residential 1-3 Mbps = $57.13 monthly 3-6 Mbps = $67.13 monthly 6-8 Mbps = $77.13 monthly 8-12 Mbps = $107.13 monthly 12-16 Mbps = $137.13 monthly Business 3 Mbps = $99.98 monthly 6 Mpbs = $119.98 monthly 8 Mbps = $139.98 monthly 12 Mbps = $199.98 monthly 16+ Mbps = $259.98 Residential 1-3 Mbps = $39.99 monthly 3-8 Mbps = $59.99 monthly 8-12 Mbps = $79.99 monthly Business 3 Mbps = $69.98 monthly 6 Mpbs = $89.98 monthly 8 Mbps = $109.98 monthly 12 Mbps = $169.98 monthly 16+ Mbps = $229.98 N/A N/A Opticom No published pricing. !!!!!!!!!!!Page 32 of 130 SETTING A VISION FOR THE FUTURE A modern business-oriented, high performance Gigabit network in Bozeman would have the following characteristics. EXPANDED BANDWIDTH IN BOZEMAN As a long term goal, businesses in Bozeman should have as much bandwidth as they need to market and sell their services globally. General availability of Gigabit ﬁber to most business locations is needed to support the business class services that are being requested by commercial and retail businesses in Bozeman. Unlike roads, water, and sewer systems, ﬁber capacity can be increased incrementally as needed without incurring additional construction costs, making it a reliable and secure investment. REGIONAL AND NATIONAL CONNECTIONS Bozeman currently has limited competitive long haul ﬁber services available in the community–an economic development advantage that could be improved. Getting good connections in and out of an area is often a very difficult challenge for many communities, but improved local business access to ﬁber would create more competition for data traffic in and out of the city: a key economic development beneﬁt. The challenge is to leverage more local connections to these ﬁber networks to drive down local broadband service costs, which will in turn help attract businesses and jobs. SYMMETRIC BANDWIDTH To support business needs, it is critical to have affordable service options that offer symmetric bandwidth: that is, equal upstream and downstream data capacity. Most current broadband systems restrict upstream data capacity to a fraction of the downstream capacity--upstream capacity is often only 10% of downstream capacity. These limits restrict economic development, entrepreneurial activities, and work from home opportunities. Increased access to ﬁber services via modest investments in telecom infrastructure can help retain existing businesses and attract new ones, especially in Bozeman’s downtown core. WIDESPREAD AVAILABILITY Widespread availability of broadband should be an important goal for Bozeman. Over time, high performance network connections should be available at most business locations. Broadband is increasingly being used to make relocation decisions. AFFORDABILITY It is more efficient from both network and ﬁnancial perspectives to provide some basic infrastructure on a shared basis--leasing that infrastructure to private sector providers. !!!!!!!!!!!Page 33 of 130 Community investments in basic infrastructure allow service providers to offer services at lower cost because their capital expenses have been reduced substantially while increasing their access to a much larger, aggregated market. SUPPORT FOR A WIDE RANGE OF SERVICES BEYOND “TRIPLE PLAY” Telecommunications services have undergone a massive transformation in the past ﬁfteen years, and that change will continue for at least an additional ten years as all services formerly delivered over narrow bandwidth analog networks (i.e. the traditional “triple play” of Internet, TV and telephone) are delivered over wide band digital networks. Many new services (e.g. YouTube, iTunes Music Store, VoIP phone services) were not anticipated or predicted by most industry pundits just ten years ago. Newly emerging high bandwidth services include a wide range of telemedicine and telehealth services, new kinds of online entertainment options, and many more kinds of business and ecommerce services. Any telecom infrastructure investments undertaken must be capable of supporting a wide range of future services that are going to emerge but cannot be predicted precisely. COMPETITIVE MARKETPLACE Increased awareness of alternative service providers via carefully targeted pilot project ﬁber investments will help lower costs for businesses. This will increase the kind and type of service offerings while keeping prices lower than those in communities without a competitive marketplace for telecom and broadband services. This will make Bozeman more competitive from an economic development perspective and help to retain existing businesses and jobs and also help to attract new residents and businesses to the area. LIMITED GOVERNMENT INVOLVEMENT Investments should be limited to providing basic infrastructure; services provided to businesses and residents should be offered by private sector service providers. Incumbent providers as well as other interested ﬁrms should all be invited to use this “open access” community-provided infrastructure to sell current services and new, innovative services both to existing customers in Bozeman and new customers. This approach will keep elected and appointed officials out of the business of providing telecom services directly to the public. Communities where the local government has chosen a “municipal retail” approach, where residents and businesses buy telecom services (e.g. telephone, Internet, TV) directly from the local government have often been sued by incumbent providers on the grounds that public funds should not be used to compete directly with the private sector. !!!!!!!!!!!Page 34 of 130 Economic Impact and Benefits Other communities across the United States are already actively pursuing new and innovative public/private partnerships to improve the access and affordability of telecom services delivered via broadband. The Fiber To The Home Council maintains statistics on the growth of residential ﬁber in the United States. About 13 million premises have been connected with ﬁber, but that represents only about 12% of American homes. The deployment of ﬁber is highly dependent upon location, so some densely populated urban areas, primarily on the East Coast, are getting ﬁber much more rapidly than other areas of the country. Communities that have affordable broadband are enjoying a faster rate of economic growth than communities that lack broadband, based on a CMU/MIT study (Measuring the Economic Impact of Broadband Deployment, Sirbu and Gillett, 2006). A more recent study (2014) by David Sosa of the Analysis Group found that the availability of next-generation broadband speeds provided by Gigabit ﬁber substantially improves a community's gross domestic product. The study examined 55 cities in nine states and discovered an economic boost in all 14 communities where gigabit service was widely available. Those 14 cities displayed per capita GDP about 1.1 percent higher than the other 41 communities with limited or no access to gigabit broadband, equating to about $1.4 billion in additional GDP. The report stated, "Next-generation broadband is likely to have a substantial impact on economic output and, consequently, consumer welfare." In Kansas City, the site of Google’s ﬁrst ﬁber initiative, KCnext President Ryan Weber said that Google and AT&T plans to offer Gigabit ﬁber in the city will result in several perks. Weber noted that competition is a very good thing when it comes to providing utilities like ﬁber: “When businesses relocate to an area, that is now a big part of the conversation — access to ﬁber. They want to make sure there are a number of carriers because for some tech companies, they have two carriers coming into their office.” A Brookings Institution study (Crandall, Lehr, and Litan) in 2009 found that for every 1% increase in the availability of broadband in a community, the level of employment increases correspondingly by .3% annually. The study also found that as the level of Internet users increased in a community, there was a corresponding increase in economic growth, with a 10% increase in Internet use yielding a 1.3% increase in the economy. A new digital divide is emerging, with ﬁber as a differentiator. Communities with affordable broadband infrastructure and the ability (i.e. ﬁber) to expand capacity as demand grows over the next seven to ten years should enjoy a measurable economic development advantage over communities that lack such infrastructure. !!!!!!!!!!!Page 35 of 130 BUSINESS ATTRACTION Chattanooga and Kansas City have both reported that the “big broadband” Gigabit ﬁber available in both locations has brought new businesses. Many of these new businesses are owned by entrepreneurs that deliberately moved to one of the two cities to take advantage of the high performance networks and the associated low cost of connectivity. A near term effort to deploy ﬁber widely in Bozeman would give the city an edge in business attraction, but as more communities make similar investments, this opportunity will degrade over time. BUSINESS RETENTION If ﬁber services from a wider range of providers was more widely available in Bozeman, the cost of typical businesses services like Internet and telephone will likely decline. When the Wired Road project in southwest Virginia began offering competitive services from private sector providers, prices for Internet and phone declined by as much as 60%, and many businesses found they were able to dramatically increase the amount of bandwidth they were purchasing for Internet access while simultaneously paying less. Efforts to reduce the cost of telecommunications for businesses will become more important to business retention efforts as other communities, especially those nearby, roll out Gigabit service connections and competitive pricing. ECONOMIC GROWTH There are generalized beneﬁts for improved availability and affordability of broadband services. A analysis by Canadian ﬁrm SNG found that every dollar spent on broadband infra- structure created a tenfold return to the community in increased economic activity. A study (http://www.aestudies.com/library/econdev.pdf) of Lake County, Florida, where the local government opened its ﬁber for business use found a 100% increase in economic activity over time. Several other comprehensive studies have found a minimum of 1% higher annual eco- nomic growth in communities with affordable high speed broadband infrastructure. Over a period of years, this translates into a permanent and signiﬁcant increase in economic activity compared to communities that lack such infrastructure. BROADBAND IS GREEN Broadband brings a variety of energy-saving “green” beneﬁts: Reduced use of paper for some services and applications (e.g. reading newspapers and magazine on tablets, rather than the higher carbon footprint of home delivery of paper version). !!!!!!!!!!!Page 36 of 130 Email reduces the amount of fuel needed to deliver paper mail. Online shopping is more efficient in terms of delivery costs (one UPS truck can de- liver packages more efficiently than individual consumers each driving a private car to the store). Concentrating computing resources in the high efficiency “data cloud” can reduce the amount of electricity needed by businesses and users. JOB CREATION AND RETENTION As businesses inevitably rely more on dependable access to telecommunications to sustain their trade, they are also seeking fast and affordable networks as well. In many cases, cable and DSL companies are monopolies within a community. Unsurprisingly, these companies are able to provide unreliable and slow networks, since customers have no other choice but to purchase their products. As a result, numerous communities have taken the issue into their own hands and built their own networks. Communities are able to control the connections and the reliability of the services. Ultimately, affordable access to reliable internet services is a catalyst for economic growth and job creation. Chanute, Kansas (Chanute Municipal Network): One of the reasons why Spirit AeroSystems chose Chanute for their new manufacturing facility is because of their leading broadband infrastructure. As a result, the plant created over 100 new jobs. Bristol, Virginia (Optinet): This community has a publicly owned network that at- tracted companies like CGI and Northrup Grumman. These companies not only cre- ated 700 jobs, but also paid twice the average wage in the community due to the con- venience of the network. Springﬁeld, Missouri (SpringNet): When a carrier failed to meet the demands of Springﬁeld, SpringNet was created and ultimately served to provide the necessary connectivity to create over 400 jobs to the community. Chattanooga, Tennessee (EPB Fiber): According to an academic study, the ﬁrst ten years of the EPB ﬁber network will produce over 3,600 new jobs correlated with the City’s high speed Internet, phone, and television services. Palm Coast, Florida was able to retain the city’s largest employer (over 500 jobs) be- cause the city-owned open access ﬁber network sharply reduced the cost of Internet access within the City. PUBLIC SAVINGS When local governments build their own networks, they experience striking savings and greater reliability. How? Since the local governments own the network, they have the leverage to determine the future costs and when these price hikes would occur. Community anchor institutions like schools, libraries, and government facilities may reap in the greatest savings because they are no longer contracted to sign a lease to join a network. !!!!!!!!!!!Page 37 of 130 Martin County, Florida: Once the initial capital investment in the ﬁber asset is paid off, Martin County School District will save nearly $340,000 per year. In other words, the school district will only pay an estimated $6,000 per year for a gigabit connection to 26 locations. Bristol, Virginia: One study concluded that Bristol schools have saved $1 million from 2003-2008 just by self-provisioning phone services. This results in nearly $10 million in savings for the community. Martinsville, Virginia: Similarly to Bristol, Virginia, Martinsville saves between $130,000 and $150,000 annually because they do not need to lease telephone lines. Medina County, Ohio: When data needs were fulﬁlled by Time Warner Cable, High- land Public Schools spent $100,000 per year for the company’s services. However, the county saved $82,000 in 2012 when it switched over to the Medina County municipal network since the cost was only $18,000 per year. The city of Wilmington, North Carolina uses its ﬁber network to turn the lights off at sports parks at night. Cameras have been placed at every sports and recreation ﬁeld, along with remote control light switches. A single city employee can quickly check the cameras to see if anyone is still at a ﬁeld, and if not, a couple of mouse clicks turn off the lights. The city expects to save $800,000 per year on electricity costs. !!!!!!!!!!!Page 38 of 130 Risks The proposed network has some signiﬁcant advantages for Bozeman but taking advantage of that opportunity will include challenges and risks. This section discusses what the new entity (i.e. Bozeman Fiber, or BF) should consider. TAKE RATES New networks like the one proposed succeed only if take rate targets are met. Take rate refers to the number of customers that actually subscribe to one or more services. Take rate targets are established in a detailed ﬁnancial projection, and are adjusted over time as actual take rate data becomes available once the network is in operation. If the take rate is too low, revenues will not meet goals, and lowered revenues may affect the project’s ability to pay its bills and maintain and operate the network. While service providers are responsible for sales and for Tier One technical support of their own customers, the initiative will have to sustain an ongoing modest public awareness campaign to ensure that residents and businesses know that there are new connectivity options. It will be important for elected and appointed officials to promote the project and to provide news and information in a way that encourages customers to buy from providers on the new network. Take rate projections are a signiﬁcant risk factor in any project of any size, and must be considered carefully. Take rate risk can be managed by only building in areas where businesses have made a threshold commitment to buy a minimum dollar value of services (e.g. 30% or 40% of businesses in a deﬁned area must commit in advance before build out would commence). TRANSPARENCY AND OPENNESS The City should expect a high level of scrutiny from citizens, local media, and even some coverage from statewide and national media. It will be important for City officials to be able to talk comfortably and knowledgeably about the project. SERVICE PROVIDER ATTRACTION AND MANAGEMENT In part, the network’s success depends upon the ability of the network to attract and retain service providers. Service providers will expect to be able to obtain both pricing and technical information quickly and reliably, and the new entity must be prepared to offer contracts that are fair and equitable to all participating service providers. While we do not anticipate problems attracting service providers to sell their services on the Bozeman network, not every provider will exert an equal level of marketing, nor will all providers offer equivalent levels of customer support. The network will have to develop and maintain good relationships with the providers on the network, meet regularly with them to !!!!!!!!!!!Page 39 of 130 ﬁnd out what they need to keep them interested and selling, and the project must be prepared to offer pricing and marketing incentives to meet take rate and revenue targets. CONTRACT MANAGEMENT In large part, a key role of Bozeman Fiber is one of contract management: Essential contracts include the network operations contract, the outside plant maintenance/repair contract, and perhaps most important, contracts with service providers. BF will need legal counsel experienced with the development of these types of contracts, and Bozeman Fiber must have experienced telecom counsel that can produce the right kinds of agreements in a timely matter and at an affordable cost. MARKET SIZE Market size is a key consideration for evaluating risk. Market size (called “addressable market,” or the number of potential customers) determines the level of interest of service providers, who are the primary customers of an open network. Certain kinds of services are essential to the ﬁnancial viability of a community network, especially TV and telephone services. While telephone services can be offered affordably in even very small markets, the overhead costs of establishing a local or remote TV head end (equipment that manages and distributes the channels available from a provider) is still relatively expensive compared to providing other services like Internet access. A rule of thumb for evaluating market size is that a minimum of four to ﬁve thousand potential residential customers (households) are needed to attract an IP TV provider. Note that ﬁber is required for adequate TV package offerings. Bozeman has a residential market of 16,662 households (2012 estimate) and a business market size of approximately 2,845 establishments. The City represents a business opportunity for service providers who can make a business case for providing advanced services beyond Internet access, TV, and telephone: home health care, home security monitoring, computer backups, pay per view/video on demand, and other high margin services are going to become increasingly common. Alternatives to existing cable and satellite TV offerings will not become available until ﬁber connections are more widely available. FUNDING Excellent leadership and hard-nosed business management of the enterprise are essential to the project’s ability to obtain necessary funding. Although the network may be operated as a government effort, it must be managed with the same attention to costs, revenue, and ﬁnancial administration as any private sector business. The project must be able to develop and maintain “investment quality” ﬁnancial reports and business models to attract private sector sources of funding like revenue bonds, municipal leases, commercial loans, and business contributions. If investments are restricted to basic infrastructure like tower sites, ﬁber, towers, and equipment shelters, maintenance costs will be relatively low and it should be possible to structure attractive tower space lease rates to cover routine maintenance, minimizing ﬁnancial risk and requiring limited funding. !!!!!!!!!!!Page 40 of 130 SERVICE PROVIDERS While in many respects a community broadband network shares many similarities with other public utilities (e.g. roads, water, sewer) there is one fundamental difference. Other public utilities like water and sewer have a captive audience and the utility is able to operate as a monopoly–meaning the customer base can be taken for granted. Early discussions with service providers have been positive, with at least four local and regional providers making requests for additional information about the effort. A community broadband network is a public/private enterprise, and service providers are the primary customers of the network. Service providers cannot be taken for granted. Instead, a fair fee structure, a high quality network, excellent maintenance and operations processes, and organizational ﬂexibility will be required to recruit and retain service providers. Projects that are not successful in attracting service providers will fail. Affordable lease rates for tower space and/or ﬁber connections will attract service providers. Several open access projects in Virginia (Danville, The Wired Road) have not had any difficulty getting service providers to use the infrastructure. AccessEagan and New Hampshire FastRoads have also not had difficulty attracting multiple providers. TECHNOLOGY A question that often dominates early discussions of community broadband projects is, “Are we picking the right technology and systems?” Everyone has experienced the rapid obsolescence of computers, cellphones, printers and other IT equipment. There is always some risk associated with making a substantial investment in a network. However the risk can be managed. In a predominantly ﬁber network, a large portion of the investment will be dedicated to getting ﬁber in the ground or on poles throughout the community. Properly installed ﬁber has a minimum 30 to 40 year useful life, and ﬁber installed by the telephone companies in the seventies is still in use today. Fiber also has a useful property not shared with other public systems like water, roads, and sewers. The capacity of ﬁber can be increased without replacing the ﬁber or adding additional ﬁber. Instead, ﬁber capacity can be increased indeﬁnitely by replacing the electronics at each end of the ﬁber. This means that a community investment in ﬁber creates a stable, long term asset for the community with long lasting value. The equipment used to light the ﬁber has a shorter useful life, and is usually depreciated over a period of 7 to 9 years. Some equipment may remain useful longer than that. Wireless equipment must be replaced much more often (typically 2 to 4 years of useful life) because it is typically exposed to much harsher conditions (extreme heat and cold, lightning strikes, ice, snow, rain, wind). The primary technology risk is selecting a vendor who provides equipment that does not perform as advertised. This risk can be managed by a careful procurement process which would !!!!!!!!!!!Page 41 of 130 include a careful analysis of network capacity and features, detailed RFPs that specify equipment features and functions explicitly, and a thorough RFP evaluation process. Risk in this this area will be relatively low if investments are conﬁned primarily to passive infrastructure in the early pilot projects. !!!!!!!!!!!Page 42 of 130 Why Invest in Fiber? A common question during the development of a community ﬁber project is, “Isn’t wireless less expensive?” In this section, we provide an analysis of all the wired (copper-based, ﬁber-based) and wireless technologies that are in use or in near term deployment. Fiber is a “future proof” infrastructure investment with a useful minimum life of 30 to 40 years when installed properly. The capacity of ﬁber has been and will continue to be expanded regularly without incurring additional construction costs (by changing the equipment). This is in contrast to other community infrastructure systems like water and sewer that require massive and expensive upgrades to the water or sewer lines once the capacity of those lines has been reached. We are now seeing even small and medium-sized businesses asking for ﬁber connections. Without ubiquitous ﬁber infrastructure, Bozeman will not be economically competitive. Communities that already worry about losing too many young people to other areas have much more to worry about. In a recent college class, a professor asked 30 students how many would live in a community without broadband, and not a single student raised a hand. Fiber is the only transmission system that will be able to deliver all the services businesses and residents will expect and demand in just a few years. Communities that choose to delay ﬁber infrastructure investments will be at a severe disadvantage in the next several years when trying to attract and retain businesses and workers. From an economic development perspective, ﬁber is the only technology that offers both very high bandwidth capacity and high security. If Bozeman wants to attract and retain high tech ﬁrms developing cutting edge, proprietary systems and data, ﬁber is the only viable business class infrastructure. TELEPHONE/DSL DSL (Digital Subscriber Loop) technology utilizes existing copper twisted pair telephone lines to provide broadband services. There are many variants of DSL, and the differences among them are primarily bandwidth and distance. Most DSL systems are limited to a maximum of 18,000 cable feet from a telephone switch or remote access module (DSLAM). Faster variants of DSL are limited to as little as a few thousand feet, making the service areas inconsistent from a subscriber perspective. A neighbor a few houses away from a home with DSL service may be told that no DSL service is available (because of the cable limitations). Current low cost DSL residential service offerings are priced competitively compared to cable modem service, but also tend to be much slower. Because of the requirement to deploy DSL equipment close to subscribers, rural areas are at a distinct disadvantage for DSL. It is not uncommon in rural areas to have cable runs of many miles (from a telephone switch), making DSL impractical without substantial equipment upgrades. Another problem in rural areas is the age of the telephone cable plant. Even if a home or business is located within the prescribed distance to DSL equipment, older copper !!!!!!!!!!!Page 43 of 130 twisted pair cable may not be capable of handling the DSL signal properly. In some cases, speed of the service is degraded, and in other cases, DSL may not work at all. The primary problem with DSL is the lack of capacity over the long term. In an optimum DSL situation, with high quality cable plant and subscribers close to DSL switches, the fastest DSL is limited to 15 to 20 megabits under these optimum conditions. Most homes will never be able to receive DSL services at those speeds because of sub-optimal service conditions. DSL cannot provide the capacity needed by businesses and residents in the near future. CABLE SYSTEMS Cable systems that provide broadband in most U.S. communities use what is called HFC systems, or Hybrid Fiber Coaxial systems. Typically, ﬁber delivers television and broadband signals to equipment located in or near a neighborhood, and copper coaxial cable is used to connect the subscriber’s home or business with the equipment fed by ﬁber. Cable systems have never been widely deployed outside community boundaries (residential neighborhoods and business districts) because of the high cost of placing equipment near subscribers. In this regard, cable systems are limited in the same way that DSL systems are limited, and rural communities are at a distinct disadvantage because of the lower density of homes and businesses. Cable systems also cannot provide the future capacity that will be required by homes and businesses in the near future. Some cable companies have begun to announce pilot projects offering Internet access at speeds “up to 50 megabits.” While this is an improvement over current offerings advertised typically at bandwidth “up to 6 megabits,” this bandwidth is always shared among all users on a node. It is not unusual to have between 100 and 500 users (typically residential homes) on a single node. The advertised bandwidth (e.g. “up to 6 megabits”) is shared among all users on a node, meaning that the usable per household bandwidth during peak use times like early evening is much lower. Cable modem service also typically has asymmetric bandwidth, meaning that the advertised bandwidth (“up to 6 megabits,” or “up to 50 megabits”) is only available on the downstream side, coming into a home. The upstream bandwidth available to users to send data and content is often 1/10th of the downstream capacity. This makes most cable modem systems unsatisfactory for many kinds of work from home services and applications that require more balanced upstream and downstream bandwidth, like videoconferencing, which works best if the bandwidth is symmetric (the same capacity in both directions). This issue of symmetric bandwidth will become increasingly important as the cost of fuel changes commuting patterns and more people want to work from home part or full time. SATELLITE Satellite broadband is a wireless technology, and to avoid confusion, systems like WiFi are often referred to as terrestrial wireless. Satellite broadband uses geostationary satellites located 22,500 miles above the earth, and data traversing a satellite system has a 45,000 mile loop (up !!!!!!!!!!!Page 44 of 130 and down). As fast as radio signals are, this distance still introduces latency (time delays) that can cause problems with real time transmission of telephone (VoIP) and videoconferencing. Bandwidth is generally less than what is available from DSL or cable systems, with a typical residential service offering 700 kilobits/second downstream and 128 kilobits upstream for between $55 and $65 per month. Higher speeds (e.g. 1 megabit/second downstream and 200 kilobits upstream) are also available for $10 or $20 per month additional. If a home or business already has satellite television service, a second small dish antenna is needed for broadband service. Some companies have tried combining both services on a single dish, but this has usually had poor results because of signal and satellite position issues. Inclement weather (e.g. heavy rain, snow) can degrade or temporarily cut off satellite signals. There are two primary providers of satellite broadband in the United States: Hughes Network Services and Wild Blue. Wild Blue has partnered with many rural electric coops, with the coops acting as sales agents and installers. Hughes uses independent small businesses as installers and resellers. Despite some limitations, satellite is an excellent broadband service option in underserved areas; no major infrastructure investments are required to obtain service, and speeds are much better than dial up, and in some cases may be equal to or better than entry level DSL service packages. Satellite is not a business class service option for most businesses due to the asymmetric connections, and low bandwidth, and satellite still remains relatively expensive compared to wired or terrestrial wireless service. BPL Broadband over Power Lines (BPL) was widely viewed a few years ago (circa 2005) as a very attractive alternative to ﬁber. Since then, most companies making BPL equipment have gone out of business. The technology was found to be expensive and trouble-prone. More recently, the concept has been revived for in-home use, where some of the technological problems can be overcome more easily than in a wide area electric grid. BPL equipment designed for in home use transfers the broadband signal delivered by DSL or cable to different rooms in a home or business using the electric wiring. To provide service to a neighborhood, some electric companies use a system similar to cable systems, where ﬁber is used to get broadband near a cluster of homes, and then the signal is carried over electric lines for the last few hundred yards or last mile or two. In some other systems, the signal is carried via electric cables all the way from a broadband head end. BPL has many of the same limitations as DSL and cable modem services. It is copper-based, and is limited in the amount of bandwidth that the technology can deliver. It requires technicians who have extensive training and experience working with high voltage systems, since special bridges are installed at every neighborhood transformer (which also makes it a relatively expensive service). Some electric coops are considering BPL as a way to quickly provide some form of broadband to their rural customers. BPL’s main advantage is that no new cable must be laid to deliver the service to a home or business. However, like DSL and cable systems, BPL is not a long term solution. !!!!!!!!!!!Page 45 of 130 In a conversation with a rural electric coop that had been “experimenting” with BPL for more than two years, the coop representative shared that they were only able to achieve about 250 kilobits of throughput over distances of twelve miles. While 250 kilobits is better than dial up, it will not meet the long term needs of rural residents and businesses. FIBER Fiber is a future proof investment. The upper limit of ﬁber capacity has not yet been found, and off the shelf hardware can handle thousands of times the needs of an average home or business well into the future. Fiber has a life expectancy of thirty to forty years, and may last much longer than that; every year, the number goes up as ﬁber systems installed in the 1970s continue to perform adequately. A single ﬁber can carry all the traffic and services needed by a home or business, including voice telephone service, television programming, live videoconferencing, and HD television. Fiber’s primary drawback is its apparent high cost compared to other systems. Fiber is often unfairly compared to wireless, with the misleading conclusion that wireless is much cheaper. Regrettably, most ﬁber versus wireless studies compare the start up costs for wireless to the thirty year life cycle costs of ﬁber infrastructure. During a thirty year period, ﬁber is installed just once, while wireless systems will have to be replaced entirely several times. Properly costed over a thirty year period, ﬁber is actually less expensive than wireless, with many times the capacity. Metro Ethernet is a point-to-point service provided over two ﬁber optic strands (single ﬁber technology is available but the hardware is quite expensive and still relatively unused). Metro Ethernet networks can deliver service as far as 25 miles from network element locations in speeds up to 10 Gigabits per second (10GB Metro Ethernet circuits are now commonly available from some providers). SONET or Synchronous Optical Network is a point-to-point technology usually deployed in a bi-directional redundant ring. Most carrier and tier 1 service provider backbones are conﬁgured in a redundant ring. A SONET ring is self healing (provided that only one link is cut). SONET circuits are considered expensive and are usually a last resort if other ﬁber optic services are not available. A Passive Optical Network, or PON, is a ﬁber optic network based upon a splitter technology. A single PON port can support up to 64 customers utilizing either daisy chained splitters or a central splitter location. For service providers PON is cost effective as it allows the service providers to create “ﬁber light” networks and fewer network elements. However, PON has many drawbacks including bandwidth limitations due to the shared nature of the feeder ﬁbers as all customers fed from a splitter share bandwidth over a single ﬁber (or single pair in some networks). A major drawback of PON is the upgradeability of the network which usually requires additional feeder ﬁber to be deployed which is costly as it is considered a “forklift upgrade.” !!!!!!!!!!!Page 46 of 130 We are now seeing even small and medium-sized businesses asking for ﬁber connections. Without ubiquitous ﬁber infrastructure, communities will not be economically competitive. Communities that already worry about losing too many young people to other areas have much more to worry about. In a recent college class, a professor asked 30 students how many would live in a community without broadband, and not a single student raised a hand. Fiber is the only transmission system that will be able to deliver all the services businesses and residents will expect and demand in just a few years. Communities that choose to delay ﬁber infrastructure investments will be at a severe disadvantage in the next several years when trying to attract and retain businesses and workers. THE WIRELESS BROADBAND DEBATE We do not subscribe to the wireless vs. ﬁber debate. We believe both wireless and ﬁber systems are required in communities. Virtually everyone,within a few years, will have a very capable wireless device that supports phone service, email, Web browsing, gaming, TV, music and a host of other services. Residents and businesspeople will expect these devices to work everywhere; this means communities will need a well-designed wireless network of towers, antennas, and related systems, including ﬁber backhaul. A ﬁber connection is needed to get the wireless signals onto the Internet from local wireless access points; ﬁber can be used to dramatically improve wireless performance by providing a very fast connection from the wireless radios to the rest of the network). Wireless systems work best when supported by a ﬁber backbone to carry traffic to and from its destinations. Fiber and wireless systems are complementary, not competitive. Wireless is often touted as a broadband panacea. Across the country, many communities are rushing to offer some kind of wireless system. These municipal wireless systems often lack sustainable business plans, and many well publicized projects are beginning to have problems. St. Cloud, Florida offers free wireless broadband throughout the city, but the quality of the service tends to be inconsistent, and many residents have refused to give up paid cable and DSL service. Philadelphia’s well known project found that more access points are needed than originally anticipated, and the private ﬁrm that promised to operate and maintain the network pulled out, forcing the City government to take over an expensive system that was not able to deliver the connectivity that residents expected. Current wireless systems lack the capacity to handle high bandwidth services like video when more than a few people are using the same access point. Systems like WiMax are very expensive, and while prices will decline, when costed over a reasonable life cycle, wireless systems are relatively expensive. Wireless systems are inherently less secure than cable based systems, and we never recommend that a business uses a wireless connection for its primary access unless no other alternative exists. The primary future use of wireless will be for mobile access to services, rather than ﬁxed point access. In under-served areas, properly designed wireless systems are an excellent ﬁrst step, but are not a complete solution over the long term. Over time, wireless to the home will have to be replaced with ﬁber connections to meet !!!!!!!!!!!Page 47 of 130 demand, but wireless will remain important for mobile access to broadband (e.g. access to the Internet and email from mobile phones and laptops). WIRELESS TECHNOLOGY TRENDS AND ISSUES Over the past several years, numerous communities large and small have attempted to build and operate municipal wireless Internet services. Large cities like San Francisco and Philadelphia announced ambitious plans to build WiFi “blankets” to provide wireless Internet access to most homes and businesses. Smaller cities like St. Cloud, Florida and Sandoval County, New Mexico have also built municipal WiFi systems. There is now a wealth of lessons learned from these early efforts: WiFi is expensive if you truly want total coverage. Many WiFi projects have underes- timated the number of access points that are needed--something that is causing prob- lems with the much touted Philadelphia WiFi effort. Some contractors and vendors may be underestimating the number of access points to keep costs lower, so it is im- portant to be realistic during planning stages about what a community can afford to do in terms of deployment of access points. WiFi is not a ﬁrst choice for business class services. Few businesses of any size are willing to run their business on a WiFi connection unless the only other option is dial-up. It may be adequate for small one or two person businesses, but most busi- nesses want a more secure and more reliable wired connection. Wireless vendors have to be selected carefully. Sandoval County, New Mexico experi- enced severe problems with two different wireless ﬁrms hired to build a wireless Inter- net system--both ﬁrms were unable to provide a working system and within budget. WiFi has reliability problems. Even if you are in range of an access point, foliage on trees, building walls, rain, snow, and other access points can degrade the signal. Be- cause WiFi is an unlicensed service, anyone can run an access point. The popular and very common home wireless routers can cause interference and slow down other ac- cess points. WiFi, even the newer G and N services, can't handle video very well, and this limits the potential of such a service to be ﬁnancially viable. A community broadband system has to have a solid business model that is ﬁnancially sustainable, and that means being able to carry business and residential video services. WiMax is a newer set of frequencies and power standards that are widely advertised as a silver bullet for broadband, but there is nothing magic about WiMax. It uses many of the same frequencies that WiFi does, meaning that it still requires clear line of sight to get an adequate signal. WiMax radios can use both licensed and unlicensed frequencies, and the unlicensed frequencies will suffer from the very same interference problems from which WiFi suffers. WiMax has not been widely deployed and is likely to be superseded in some areas by LTE (Long Term Evolution), a cellular wire- !!!!!!!!!!!Page 48 of 130 less technology that offers equivalent bandwidth and has the advantage of supporting traditional cellular voice services. Licensed WiMax frequencies perform better because there is less interference, but this presumes the licensed frequencies are available (some other private or public entity may have licensed the frequencies for a particular geographic area). The licenses, if available, may cost several thousand dollars to purchase and then there is an annual renewal fee. WiMax and LTE capacities and distances are widely exaggerated. It is very common to see promises of “up to 80-100 megabits” of capacity and distances of “10 to 20 miles.” With respect to bandwidth, that 100 megabits of capacity will be shared among all connected users, so if 100 households are trying to access the network via a single WiMax access point, the usable bandwidth may be more like 2-4 megabits per household or per user. Distances are limited by line of sight. Both WiFi and WiMax signals will work over many miles, but only with narrow angle antennas and clear line of sight. While WiFi can easily reach ten miles or more with clear line of sight, and WiMax can reach twenty miles with clear line of sight, in practice these optimum dis- tances are rarely achieved; it is more realistic to consider WiFi usable over 2-4 miles and WiMax over 4-8 miles. Tree cover is particularly problematic, and it is often nec- essary to remove tree limbs, an entire tree, or to relocate the antenna in order to get a good signal. LTE and television “white space” systems are emerging standards that can provide connectivity at much longer distances (ﬁve to ten miles is possible under ideal circum- stances) and the radio frequencies used are better able to penetrate at least some foli- age. Bandwidth of several megabits will be possible, and will compare very favorably with copper-based systems like DSL. But even these systems will have a very limited ability to handle TV programming, interactive videoconferencing, and other business class services. Wireless services will be important in rural areas. And wireless is not going away; it will remain as an important component of a well-designed community broadband system--as a mobility solution. As we travel around the community, we want to be able to access the Web, check email, make phone calls, and do other sorts of things. Wireless services enable that, and in rural areas, wireless services are an important step up from dial-up. Communities need to regard telecom as essential public infrastructure, critical to community and economic development. And that well-designed community infrastructure includes both wireless access and eventually ﬁber to every home and business. With the right business and ﬁnancial planning, such systems can pay for themselves and provide new revenue streams to local government, while lowering the cost of telecom services. !!!!!!!!!!!Page 49 of 130 FIXED POINT ACCESS WIRELESS Fixed point wireless Internet access via some private sector providers is already available in many areas of the country. Community investments should be limited to tower sites and towers, which can be leased to the private sector. Cellular data service (e.g. 3G, 4G, and the newer LTE-based services) are a substantial improvement over dial up, and while prices are not cheap (the typical monthly fee for a data plan is is $25 to $40), it is likely many residents and businesses would be happy to pay more to get off dial up. This kind of service can introduce additional competition for Internet access customers, which can lower prices and create incentives to offer better customer service from the providers. Over time, most ﬁxed point Internet users (ﬁve to seven years out) will want to migrate to ﬁber connections which will have the capacity to provide a much wider range of services, including HD TV, telemedicine, and tele-health, among other applications. Fixed point wireless infrastructure investments (e.g. locations for towers, towers, ﬁber and duct backhaul connections) can be re-used over time to support mobile wireless services and long term public safety voice and data services. A well-designed ﬁber network will help increase the availability and affordability of wireless broadband services, especially if existing wireless providers are included early in the planning process. The goal would be to identify existing tower sites that could be reached affordably with ﬁber. Fiber access to these towers will lower the cost of backhaul for local wireless broadband providers while simultaneously allowing them to increase bandwidth and overall performance. MOBILE ACCESS WIRELESS Wireless access to the Internet and other mobile services like cellular telephone providers is a long term need that will not be replaced by ﬁber access. In fact, over the next ﬁve to seven years, the most common use for wireless Internet access will be for mobility--casual business, personal, and government access away from the home or office. Mobile wireless access to voice and data services is already widely available from multiple providers in most of the U.S. Nationwide, Verizon, Sprint, and AT&T have already begun an aggressive expansion and upgrade to LTE (the so-called 4G/5G networks). However, the bandwidth caps and bandwidth overage charges make cellular data services too expensive as a primary residential or small business connection. Perhaps more alarming, Verizon and AT&T are abandoning their copper line plant in many rural areas of the country, and are only offering cellular-based dial tone for home and small business use. This could be problematic for business and economic development in rural areas, as the sound quality of cellular connections is often noticeably inferior to a landline connection. Any community wireless investments should be made with care as there is some risk of spending too much too quickly; wireless systems, frequencies, and capacities change quickly, and there is always some danger of making a commitment to a protocol (e.g. WiFi, WiMax) !!!!!!!!!!!Page 50 of 130 that is superseded by another set of incompatible protocols and equipment. If investments are made, risk can be reduced by investing primarily in tower sites (real estate), towers, equipment shelters, and other passive network facilities that require little maintenance and that have long life spans. Space on towers can be leased to private sector service providers, which will provide a revenue stream to support ongoing maintenance costs. WHITE SPACE WIRELESS “White space” wireless uses a set of radio frequencies formerly allocated to analog television. Once the FCC mandated a change to digital over the air television broadcasts, some of the existing TV spectrum was re-allocated for broadband use. Like many other wireless technologies, promises have been plentiful while usable and/or affordable product has been scarce. White space wireless has the potential to replace WiFi and WiMax in rural areas. The radio frequencies used by white space radios have a better ability to penetrate at least some tree cover, will travel longer distances (several miles, rather than the more typical one or two miles for “last mile” subscriber connections), and will penetrate building walls better. However, the bandwidth is limited to a few meg. White space equipment has the potential to be quite useful in rural areas as an interim solution until ﬁber reaches those areas. The two current problems with white space solutions is that most vendors are only able to provide the equivalent of prototype equipment that carries very high price tags. One enthusiastic white space radio vendor charges $1000 for the radio needed at a home or small business, compared to $100 or less for equivalent WiFi equipment. The base station radio that would be placed on a tower to provide connectivity to an area, from the same vendor, costs $8000 compared to as little as $500 for equivalent WiFi equipment. Prices will gradually come down, but affordable white space solutions appear to be at least twelve to twenty-four months away. MIMO WIRELESS AND LTE ADVANCES MIMO (Multiple Input, Multiple Output) describes a variety of technologies that can be summarized as using more than one receive and transmit antenna for wireless data applications. Wireless protocols that are using the MIMO concept include IEEE 802.11n (Wi-Fi), IEEE 802.11ac (Wi-Fi), 4G, LTE (Long Term Evolution), and WiMAX. Each of these protocols use the MIMO technology to increase the amount of available bandwidth in a given section of radio frequency spectrum. New hardware is required to make effective use of MIMO. While the technology increases wireless bandwidth, the typical amount of bandwidth being used by wireless devices is also increasing rapidly. Some applications where MIMO is likely to provide noticeable improvements are in home wireless routers, where the effective throughput will be able to better handle the demanding bandwidth requirements of HD and 4K video streams. MIMO is slowly being developed for use with cellular smartphones, but both the phones and the cell tower radios have to be upgraded to support MIMO. !!!!!!!!!!!Page 51 of 130 LTE (Long Term Evolution) is a set of protocols and technologies designed to improve the performance of voice/data smartphones. Like MIMO, both the user phone and the cell tower radios have to be upgraded to support LTE improvements. In 2013, only 19% of U.S. smartphone users were able to take advantage of LTE speeds. As noted previously, the actual bandwidth available to a smartphone user is highly variable and depends on distance from the cell tower, the number of smartphones accessing the same tower simultaneously, and the kinds of services and content being accessed by those users. The primary purpose of cellular bandwidth caps is to keep cellular users from using too much bandwidth and degrading the overall service. While LTE and MIMO improvements will improve overall cellular service, these technologies are not going to replace ﬁber to the home and ﬁber to the business. !!!!!!!!!!!Page 52 of 130 Business Models and Ownership There are three business/ownership models that were considered as part of the study. These models are: Private Sector Only Municipal Retail Wholesale Multi-Service We recommend a wholesale model, selling network transport (i.e. a shared digital road system) on a wholesale basis to retail service providers, who will market and sell to their own customers. Bozeman Fiber will be a shared infrastructure, multi-provider, multi- service network. Roads and airports are examples of common shared infrastructure used by by both public and private entities to meet a wide variety of community business and government needs. Service providers will be the customers of Bozeman Fiber. Customer aggregation is a key advantage to a shared, community-owned telecommunications infrastructure. By building ﬁber to homes and businesses, the community maximizes the market potential for private providers who want to sell services. For Bozeman, the early focus should be tied to economic development goals. Infrastructure investments should be supporting areas where business and jobs growth is most likely to occur, as this will also help ensure ﬁnancial sustainability for the network. As the revenue increases from leasing network services, the revenue that exceeds operating costs and debt can be used to expand into other areas of the county, including residential suburbs and smaller communities. Residential ﬁber build outs can occur over time as the network expands. The community investment allows these businesses to reach more customers than any single company could reach on its own. Some of the outcomes of this approach are: More customers -- When the network capacity is shared among several providers, each provider has a much lower cost of infrastructure needed to enter a market. In smaller towns and regions, this is a critical difference. Community in- vestments allow more companies to proﬁtably offer services in smaller markets than a ﬁrm could do on its own. Lower costs -- When a provider can reach more customers via a shared broadband sys- tem, lower costs of service usually results. Typical reductions in cost in open access systems are usually on the order of 15%, and are frequently much more than that. It is not unusual to see the cost of telephone service decline by 40% or more. Services aggregation occurs when communities build open networks, meaning that any qualiﬁed service provider can offer services using the community digital roadway. In this business model, !!!!!!!!!!!Page 53 of 130 there are usually several service providers competing for customers in each category of services (e.g. voice telephone service, TV, Internet access). More choice-- A natural outcome of more services is more choice for purchasers of serv- ices. Instead of a single monopoly provider of telephone or television, customers can pick and choose among a variety of service plans at various price points. More competition -- When more services are available, there is more competition for cus- tomers. Subsequently, service providers must sell services for the lowest possible price, and also creates incentives to provide excellent service to customers. Compare this to a mo- nopoly environment where there is no competition and hence little pressure for a company to provide good service--customers have no other service options. More services -- When there is a wider choice of services on the shared system, there is more opportunity to use more services. This is, in part, what makes open service provider networks ﬁnancially sound investments for communities: Open systems create a bigger market for telecom services, and thereby creates more revenue ﬂowing through a commu- nity revenue sharing plan. THE PUBLIC/PRIVATE PARTNERSHIP Because virtually any modern broadband network (and most older telecom networks) use public right of way for a large portion of network distribution, ALL business models are “public/private partnerships.” The notion of the public/private partnership is not a distinct business model, but rather exists along a continuum, with minimal public involvement on one end (i.e. only use of public right of way) to full public ownership on the other end. PRIVATE SECTOR ONLY The “leave it to the private sector” model has obvious shortcomings, which is why so many communities are now beginning to consider telecom as essential public infrastructure. Private sector ﬁrms have a primary responsibility to preserve and enhance shareholder value. They do not make operational and service area deployment decisions based on community and economic development needs. For many communities, this has meant that broadband services have lagged well behind the rest of the world and places those communities at a competitive disadvantage when trying to attract or retain businesses. The private sector model requires overbuilding, which means that each service provider must build its own network end to end to serve customers. This leads to completely duplicated networks, which increases costs and makes it more difficult for these ﬁrms to make a business case for enhanced services in many areas. This business model is a fundamental weakness, because these private networks are not only expensive, but typically underutilized. Residential networks are only used heavily in late afternoon and evenings, and are virtually unused overnight and during the work day. Business networks that are only used heavily during work hours typically have very low utilization for the other two-thirds of the day. School and education networks are used only 8 to 12 hours per day, and are empty the rest of the time. !!!!!!!!!!!Page 54 of 130 Community broadband projects can overcome this fundamental weakness and substantially reduce the operating cost of networks by using a shared model, rather than a private model. MUNICIPAL RETAIL Also known as Muni (Municipal) Triple Play. Local government builds the network and sells services in direct competition with the private sector, offering only traditional “triple play” voice, video, and broadband. Muni triple play systems are usually closed systems that offer little choice to customers. Muni triple play systems compete directly with the private sector, and tend to have very low take rates. Opponents of community broadband often cite the low take rates of muni triple play projects to “prove” that community broadband is a poor investment. But the low take rates only show that muni triple play business models are not ﬁnancially viable over the long term. The two key issues with this model are: It requires local government officials and leaders to sign long term contracts (typically 5 to nine years) with the providers whose services will be resold over the network. This means that those local leaders must have a high degree of conﬁdence that they can accurately predict, seven to nine years out, what level and quality of services the businesses and residents of the community will require. While contracts can be rene- gotiated as needs change, prices are likely to rise during that renegotiation. This model situates the local government in direct competition with incumbent pro- viders. This not only tends to keep take rates low, which threatens ﬁnancial viability, but adoption of this model also encourages lawsuits from the incumbents (Bristol, Virginia, Lafayette, Louisiana, Geneva, Illinois, and Monticello, Minnesota are exam- ples of communities that were sued after selecting the muni retail model). WHOLESALE MULTI-SERVICE APPROACH Local government and/or an independent ﬁrmly vested in the long term interests of the community builds the network and provides access to service providers on a wholesale basis. In turn, service providers offer business, residential, and government/institutional customers retail services. The providers buy wholesale transport (i.e. raw bandwidth with no services--called a Layer 2 circuit) from the network, and then add their own services (e.g. Internet, voice, TV, etc.) on that circuit to their customers. Services are provisioned individually for each subscriber. This approach limits the initial investment required of a new service provider that wants to enter the market--thereby encouraging more competition and lower prices. Issues to consider with the wholesale approach include: The Layer 2 provisioning approach allocates one or more circuits to each customer of each provider. Troubleshooting technical problems requires excellent network opera- tions with NOC (Network Operations Center) staff able to sort out whether the !!!!!!!!!!!Page 55 of 130 problem is caused by customer equipment, service provider equipment, or the network itself. Service providers require regular market and price incentives to ensure that take rate targets are met. The network has to maintain a regular public awareness marketing effort to ensure that businesses and residents are aware that the community-owned network offers new price and service options. A lesson learned from communities that have implemented community broadband networks is that with both the wholesale and open services model, it is essential to ensure that a sufficient number of service providers are prepared to sell services on the network--a minimum of two is desirable during the ﬁrst year of operations. Features Private Sector Only Municipal Retail Wholesale Multi-Service Network Basic Concept Three separate services (voice, video, data) with little or no sharing of network. Only three services (voice, video, data) with little or no sharing of network. Very high efficiency achieved by end to end automated service provisioning. All providers share network capacity. Government Involvement No government in- volvement. Private sector decides where and when to offer serv- ices. Some areas get little or no service. Government competes directory with the pri- vate sector. Government decides what services are offered. Government does not compete with private sector. Government provides high performance digi- tal road system that benefits all public and private users. Buyers have rich set of choices. Governance Owned by a private company. Community must accept whatever services are offered. Owned and operated by local government. Lim- ited triple play services sold directly by local government. May be owned by local gov- ernment or by a community enterprise like a broadband authority or coop. Wide variety of services sold by private sector companies. Competition Little or none in most areas. Cartel-like pric- ing keeps prices high. Government bureaucrats pick providers of each service. No incentive to lower prices. Level playing field creates ro- bust competition. Service pro- viders drive down costs and provide great service to get cus- tomers. Service Options Limited. Providers can offer triple play at most. Limited. Government resells triple play serv- ices. Unlimited. Low cost of market entry and high level of service automation attracts service pro- viders and encourages innova- tion. Revenue Limited by low returns on the individual serv- ices. Limited by low returns on the triple play serv- ices. Unlimited. Revenue directly linked to demand. Revenue increases with demand. !!!!!!!!!!!Page 56 of 130 Service Area Expansion Limited to high density population areas. Rural areas and smaller cities area at a structural dis- advantage. Limited by triple play approach, which keeps funds for expansion low. Unlimited. Expansion com- pletely supported by revenue sharing or use fees. Open serv- ices network can provide be- come financially sustainable relatively quickly. Risks Some areas do not get adequate service or affordable pricing. Government officials must predict business technology needs years in advance. More complex network man- agement required, but reduces costs sharply for service provid- ers, which encourages competi- tion. OWNERSHIP AND MANAGEMENT There are a variety of ownership and governance options for the locally controlled, independent private sector entity that will own and manage the network (Bozeman Fiber). This section outlines one approach that seems particularly appropriate for the Bozeman area. The intention would be to operate Bozeman Fiber as an open access network, meaning businesses and residents would purchase services from private sector providers. Bozeman Fiber would not offer retail Internet, phone, and related broadband services and would not compete directly with local providers. Incumbent providers and competitive providers in the Bozeman area would all be invited to use the network to lower their cost of delivering high performance ﬁber services in the city. Network Operations Management Contracts Network Management and OperationsService Provider Management Routine/Emergency Maintenance Bozeman FiberLenders Independent private sector entity City of Bozeman Public Awareness/ Marketing Financial Management Some passive assets are owned by the City and leased on an open access basis Customers Other customers K12 Schools Businesses !!!!!!!!!!!Page 57 of 130 In this model, the local business entity (Bozeman Fiber) owns most of the passive and active network assets. The network is operated as an open access, multi-provider, multi-service network and would welcome any and all service providers to use capacity on the network to deliver their services to their own customers. Some passive assets like conduit and handholes could be built and owned by the City of Bozeman and leased to Bozeman Fiber and/or other providers in return for recurring lease payments. Bozeman Fiber would have several essential roles: Contract Management - BF would hold contracts for outsourced network operations, outsourced network repairs and maintenance, outsourced construction of network ex- tensions, and service provider contracts for the services offered on the network. Where it is efficient and effective, Bozeman Fiber would seek to use qualiﬁed private sector ﬁrms to handle the technical operations of the network to minimize the num- ber of staff required by Bozeman Fiber. Financial Management - Bozeman Fiber would provide the ﬁnancial oversight of the network. Most routine bookkeeping and accounting would not require full time staff and could be handled by Prospera staff and/or outsourced to a local accounting ﬁrm. Public Awareness - Bozeman Fiber would have to maintain an ongoing public aware- ness campaign to ensure that local businesses are aware of the opportunity to obtain higher performance, ﬁber-delivered services at attractive (lower) rates. While service providers would be responsible for their own sales, billing and customer management, Bozeman Fiber would focus on name and brand awareness in the community. Bozeman Fiber, as a private sector enterprise acting on behalf of the community, keeps the local government out of the business of telecommunications services. The City role would be limited to building passive infrastructure (conduit, handholes) for City and County government, (SCADA controls, smart street lighting, energy management, public safety), K12 school uses, and making any excess capacity available to the private sector. !!!!!!!!!!!Page 58 of 130 Network Architecture MODERN NETWORKS OVERVIEW The diagram on the next page provides an overview of a modern broadband network, with both ﬁber and wireless components. For Bozeman, conduit and ﬁber can be deployed in phases (along with network electronics) to create a very high performance network capable of delivering affordable Gigabit and 10Gig connections in a series of redundant rings passing through major commercial and industrial areas of the city . Additionally, even higher capacity circuits, including 40Gig, 100Gig, and Gigabit wavelengths can be utilized to maximize the existing ﬁber strands to add even more capacity to the backbone portion of the network. CORE NETWORK The core network is often referred to as the “backbone” network. It is a high capacity route or set of routes throughout a community or region that provides transport between towns, neighborhoods, business districts, and other major facilities. Ideally, the core network is designed as a redundant ﬁber ring, which provides both capacity and gives the network the ability to continue operating even if the ﬁber is cut or damaged in one location. A fully redundant ring can be expensive to construct, so the “ring” feature may be a long term design goal. In Bozeman, an initial “Phase One” ring could be built to serve downtown businesses, and additional rings could be added over two or three years of development to create a highly resilient local network. DISTRIBUTION NETWORK Distribution networks are connected to the core network, and provide primary network paths through a county, city, neighborhood or business district. Distribution networks are generally part of what is called “middle mile.” Fiber-based distribution networks generally are built along most streets and roads, and can be aerial ﬁber (mounted on utility poles) or underground ﬁber (installed in underground duct or ﬁber cable that is buried directly without duct). The distribution network connects the core network (the network backbone) with the individual connections within a neighborhood or business district that connect to home and businesses. This portion of the network can be ﬁber-based or wireless, but ﬁber will be required over the long term to support video services and other kinds of high bandwidth applications like telemedicine, IP TV, business videoconferencing, and other emerging services. ACCESS NETWORK The access network is what is commonly called “the last mile,” although “the ﬁrst mile” might be more appropriate, since customers should be a primary consideration when designing a network. !!!!!!!!!!!Page 59 of 130 The access network is a direct ﬁber link between a ﬁber switch located within a neighborhood or business district, or it may also be a direct point to point wireless link from a wireless access point on a tower or building and the home or business. Network subscribers have to have Customer Premises Equipment (CPE) to get a network connection, and this is simply a small box that looks like a hub or switch. In a ﬁber network, the ﬁber cable is connected to one port, and one or more copper Ethernet RJ45 ports allow users to connect computers, phones, and TV set top boxes to it. In a wireless portion of the network, a small box with a radio and possibly an external antenna is mounted on a side of the home or business with clear line of sight to a nearby tower or building where the access radio is mounted. Core network Homes and businesses Neighborhood cabinet or hut Fiber or wireless core network with backbone routers Colo has multiple service providers offering multiple services, with single point of access to all customers. Distribution fiber Internet Access fiber Tower-mount radio/antennas wireless Neighborhood cabinet or hut Access fiber Connections to other networks via leased line or middle mile fiber Colo contains network management servers. Colo Facility Backhaul routes Backhaul routes CPE (Customer Premise Equipment) CPE !!!!!!!!!!!Page 60 of 130 COLOCATION AND NETWORK FACILITIES A colocation facility is a controlled environment (i.e. heated and air-conditioned) room with Internet access through wired and/or wireless systems. The colocation facility will be a place where ﬁber, wireless, and copper-based network facilities meet. It will be equipped to house high-end network equipment, servers, and other electronic gear. A variety of middle layer network components and services can be located within the colo including, for example, directory services, replicated content servers, routing services, and other elements needed to deliver new multimedia services to the home and small office from multiple, competing providers. In Bozeman, there are already two private sector colocation facilities, so only a modest pre-fab colocation facility is needed, primarily to house the network’s own equipment. Fiber would be terminated at the existing downtown colocation facility which would permit meeting several existing service providers. Characteristics of a colocation facility include: A reliable source of AC electric power is required, with backup UPS (Uninterruptible Power Supply) service available by an onsite generator. Controlled access to the facility (e.g. by electronic keycard) 24 hours/day, seven days a week. Racks for locating network equipment and servers, and optionally locked cages for equipment racks. Functions of colocation facilities include: Hub for new broadband infrastructure development for the community. Location for a regional and community network exchange point for local service pro- viders. Also called a peering point or inter-exchange point, this kind of facility can reduce costs and increase performance in a win-win-win scenario (because it helps keep local traffic local and reduces service provider costs, thereby reducing the price of services). In Bozeman, a modest colo facility would provide the meet point for private ﬁber and community/city owned duct/ﬁber. Insertion point for multimedia services from multiple competing providers to reach subscribers over single broadband medium (ﬁber, wireless, other). Community, campus, or building point of presence for new middle layer components required to implement next generation Internet (directory services, caching, routing). Focal point for technical resources and management of community infrastructure. Aggregation point for low cost access to gigabit scale network services. !!!!!!!!!!!Page 61 of 130 BACKHAUL Every community network requires one or more paths (routes) out of the community to carry voice, video, and data traffic (in both directions). Backhaul network connections can be purchased from a local incumbent telephone company. In some communities, there may be other backhaul providers available. Backhaul connections are usually terminated at the community-owned colocation facility. Any additional infrastructure constructed in the Bozeman area would meet service provider networks at a mutually convenient colocation facility or meet point. PROPOSED ROUTES An extensive analysis of current business locations and future economic expansion areas led to a three phase network development concept. Phase One is focused two major business areas of the City. The ﬁrst area is in the core downtown area where there is a high con- centration of existing commercial, retail, en- tertainment, and hospitality businesses. The second area includes the 7th Avenue com- mercial area to the north of downtown and provides connections to several key City lo- cations. A lateral takes ﬁber from the east end of Main Street up to the hospital. Phase One includes two fully redundant ﬁber rings for high reliability network services. Phase Two expands the network east and north of the downtown area to connect more City facilities and to connect all of the K12 schools in Bozeman. Lat- erals and drops from this ex- panded portion of the network could provide ﬁber con- nectivity to hun- dreds of additional businesses and any homes passed by the Phase Two ﬁber. !!!!!!!!!!!Page 62 of 130 Phase Three passes through several additional residential and business areas of the city, and creates ﬁve additional redundant loops, including a key business and economic growth area on the north side of the city. iConnect POP Phase Two Phase Three Phase OnePhase Two Phase Three Phase Three Phase Three Phase Three Phase Two 0 2,400 4,800 7,2001,200 Feet iConnect POP Phase One Phase Two Phase ThreeLateral Locations CAI Business Customer Tax Increment DistrictsBozeman, MT - Map 11 - Network Design: Network !!!!!!!!!!!Page 63 of 130 NETWORK DESIGN SUMMARY AND RECOMMENDATION For Bozeman’s initial network, we recommend a switched network consisting of a Calix Edge (E7-20s and E7-2s) in protected rings with Calix Customer Premise Equipment (CPE). This Open Access Network is capable of providing 1 Gig Active Ethernet connections to premises on the network while alternatively providing PON services to customers who do not have the requirement for a Gigabit connection. Drawing: Bozeman Reference Architecture Client: City of Bozeman Date: 24-OCT-2014Designer: Matt BussingContact: mbussing@designnine.comwe build networks that performDESIGN NINE Core Service Provider Colocation Site 1 Colocation Site II Internet Zayo Telehealth Services Video Storage Data Backup Video Surveillance VoIP Service Juniper MX240 Juniper MX240 Network Monitoring Provisioning Backup & Config Service Provider Backhaul Connections Network Monitoring Customer Connections:Many varieties of indoor and outdoor optical network termination devices (ONTs) are available, and will be tailored to meet the needs of large institutions, or businesses, or residential dwellings. Access - Last Mile Distribution Network FTTx - Fiber to the Home and Business Two 1.25" conduits will be buried together. One will hold the mainline ﬁber and the other will provide extra capacity in the future. In some places more conduits may be buried in anticipation of expansion. Layer 2 Distribution Network:Simplicity and ease of management are two goals of a layer 2 network design. The Bozeman network will use a ﬂat layer 2 design with VLANs for each service on the network. In a high density, 10 gig ring four E7-20s will support 1920 customers. When bandwidth becomes constrained a ring can be split to add bandwidth before upgrading equipment. In lower density areas E7-2s or stacked E7-2s can serve as a "right sized" alternative to underutilized E7-20s Calix E7-20 Calix E7-2 Calix E7-2 Calix E7-20 Calix E7-20 Calix E7-20 Calix E7-20 Provider III Provider II Bandwidth for services will be managed on the edge of the network and service assurance can be managed through bandwidth reservation on protected rings. This simple architecture will allow Bozeman to start the network with relatively low capital expenditures on network equipment. As the network grows there are many ways in which a core routed (IP or MPLS) layer can be added. To remain relevant in this fast changing industry Bozeman must build with the future in mind. Through a series of Requests for Information (RFIs) for recent clients as well as multiple Request for Proposals (RFPs) Design Nine has collected equipment information and pricing from multiple network equipment vendors and has drafted a high level architecture that meets the current needs of Bozeman and allows it to grow into a larger higher performing architecture when the demands on the network require such an investment In this section you will ﬁnd: The selection criteria we found to be the most important in making our recommenda- tion, a detailed description of the network architecture, !!!!!!!!!!!Page 64 of 130 recommendations on how to expand the network after the initial portion of the pro- ject is completed, and supporting documentation, materials, and etc., to continue with the next steps in design and implementation. Over the past 18 months for multiple clients, Design Nine has evaluated RFI and RFP responses were received from 23 different vendors representing the majority of the market engaged in providing FTTx equipment. Design Nine believes to build an efficient scalable, secure, a redundant FTTx solution at the the edge of the network must support switching technology capable of surviving any single point of failure within the network (e.g. ﬁber cut). Utilizing this “grow as you need it” methodology, this architecture allows Bozeman to limit up front capital expenditures while not sacriﬁcing the initial capabilities of the network to provide services to businesses in Bozeman. When utilizing switching in the access/edge network, there still needs to be a mechanism for re-routing customer traffic back to the core for hardware or physical network breaks. Recent standards have included ring protection in switched networks that rivals the capabilities available in synchronous networks based upon rings. Conﬁguring the distribution and access switches in rings allows for added redundancy and allows any single point of failure (ﬁber, hardware or otherwise) without a service interruption to any customers. For added redundancy at the edge, mission critical customers can be connected to multiple edge switches. Design Nine is vendor neutral. We continuously work with multiple vendors and while this architecture recommends particular vendor products, many of these can be interchanged with others (e.g. switching out Cisco for Juniper). However, based upon our recent experience, we believe that the strongest solutions for Bozeman is a Juniper Core and a Calix Edge. The largest determining factors affecting this selection are cost, scalability, and product versatility. The architecture presented in this document support Bozeman’s requirement for an open access platform that will allow Bozeman to operate the network as a provider neutral environment, and provide world class broadband connectivity to as many anchor tenants, organizations, businesses, and residents that can be connected. ARCHITECTURE EVALUATION KEY SELECTION CRITERIA In evaluation processes over the last year, Requests for Information and Requests for Proposal were released by Design Nine to give equipment manufacturers and vendors guidelines on what material to submit for our selection of an Open Access FTTx network. These RFIs/RFPs set forth the network requirements for service delivery, traffic handling, network resiliency, provisioning systems, billing systems, standards compliance, and many other features. !!!!!!!!!!!Page 65 of 130 The Respondents were evaluated on the following criteria: Cost of proposed solution (including initial cost, annual maintenance, support costs, cost of services). The Respondent’s Equipment (and/or Software) ability to meet the requirements of the Network. The Respondent’s understanding of the intended project outcome. The Respondent’s experience with the Active Ethernet and Open Access Networks. As well as ﬂexibility to operate a PON architecture where Active Ethernet may not be necessary or feasible. The professional and industry experience of the vendors. It quickly became apparent that while many vendors met the technical requirements of the network and had sufficient experience and expertise to complete the project, the Calix E7 platform is the best solution to meet Bozeman’s needs now and when required to add a routing layer in the future. NETWORK ARCHITECTURE Fiber network designs have ﬁve primary components that must be considered when developing a strategy for ﬁber investments. Backhaul – Backhaul ﬁber constitutes the routes in and out of a region. In Bozeman, CenturyLink, Opticom, and Zayo provide routes out of the city. We assume that the Bozeman network will start its ﬁber build and locate it’s equipment at a new facility, and build ﬁber to the existing downtown colocation facility where most providers already have a presence. Distribution – Distribution is the portion of the network between the Distribution sites to the Edge layer of the network. It is desirable for each distribution site to have a connection back to more than one Distribution device on a redundant ring. This is the goal of the Bozeman network, but will not be feasible until the rings of the network are completed. Utilizing a ring protection scheme such as Ethernet Ring Protection Switching (ERPS (ITU-T G.8032)) in the distribution layer will allow the network to be fully redundant, surviving any single failure (ﬁber cut, equipment malfunction or loss of power, etc.). The distribution layer will consist of Calix E7-20s or E7-2s in a ring topology connected via 10Gbps links. Access – The Edge or Access network is the portion of the network that connects customers back to an Access Switch which is connected to other Access Switches or a distribution switch (or even a core router). In the initial topology the distribution and access layers will be collapsed into a single layer. As the network grows if non-ring laterals are constructed off of the distribution rings, those laterals and any devices in those non-ring laterals would be considered a separate access layer. !!!!!!!!!!!Page 66 of 130 The future Access Network will likewise consist of Calix E7-2 switches. Each switch in the access layer will be connected to at least one other E7-20 or E7-2 switches via 10GB links and can use port diversity to increase redundancy, but still not able to survive a lateral ﬁber cut. In the current case, the Access Network will consists of the customer premise equipment (also referred to as Optical Network Terminals (ONT)) which terminates the Access Fiber to a Local Area Network (LAN), Wireless LAN or even to a POTS phone. Access ﬁber is often referred to as the “Last Mile” or sometimes as the “First Mile”. It must be noted that the Calix E7-2 and E7-20 platforms as well as the Calix ONT selected can operate either as an Active Ethernet 1GB connection or a GPON architecture depending on the selection of line cards and optics to house in the E7-2 or E7-20 chassis. The ONT is not only auto-sensing (no attenuator required) for distance, but is also able to operate on either a GPON or Active Ethernet connection. Core Network – The most desirable core network design is a full mesh between core routers and fully meshed paths to each of the distribution routers. Utilizing a mesh architecture allows the network to remain in service even if hardware fails or a core or distribution ﬁber is cut. Implementing MPLS or other protection schemes over the mesh topology allows data to be automatically re-routed in without creating a service impacting outage. Utilizing a recommended core router, the Ethernet over MPLS (EoMPLS) core can be conﬁgured as a fully meshed 10GB with sub 50millisecond failover. Colocation Facility – A modest colocation facility is needed to provide a meet point for various public and private ﬁber cables and networks to inter-connect. In the past, the telephone company switch office (Central Office, or CO) has provided that function. Today, many communities have either a community-owned data center or a privately owned data center that offers an affordable range of options for customers of broadband services. In Bozeman, there are two existing private facilities that offer rack space and interconnections. The new network would build ﬁber to the existing downtown facility, but the new network will also require a minimum of a pre-fab concrete shelter with back up generator power. The rise of Software as a Service (SaaS) and cloud-based computing and data services has increased the need for affordable data centers. Many companies now backup company data in multiple, geographically diverse data centers to reduce the likelihood of any data loss. We know of one company that uses multiple data centers for storage of corporate data and enforces a rule that any two data centers must be a minimum of twenty miles apart to reduce the likelihood of a natural disaster (e.g. ﬂood, wind storm, earthquake, etc.) would affect both data centers at the same time. Bozeman will house its “meet-me” location and its initial distribution switches (and eventual core routes) in one site and Service Providers will connect to one or both of the core devices. !!!!!!!!!!!Page 67 of 130 Project Phases For Bozeman, the development of a successful community-owned open access wholesale network will require attention in several areas including the technical (network equipment selection), engineering and construction, and business and ﬁnancial planning. It is important to note that the business and ﬁnancial planning are critical elements that will in large part determine the long term success of the effort. This section provides an overview of the key task areas and activities. The illustration below shows the sequence of key phases and activities in the course of a network project. On the pages following this diagram is more detailed information about the individual tasks and activities that will lead to successful completion of a fully operational network, including the business processes required. *****$%+%)"+%#0* * %% # ,* %**&# % &-)%%#%% % '' % * # +0+,0 )% %) % &*+*+ $+* &$$%+ &%*/++'* %% %+)+ * $'#$%++ &% #%% % +.&)") ++,)* % (, '$%+%+) #*' + &%* ,)-0%&,+% %) % )- )&- ) -#&'$%+ ,* %**% %% # #%% % % %) &*+*+ $+* )&!+$'#$%++ &% &%*+),+ &%%$%+ &%+)+*)$%+*%#** +.&)"%*+##+ &%%*+ % ,* %**)&**-#&'$%+ +.&)"')+ &%** % )&,)$%+ )- )&- )&+ + &%* )"+ %%.)%**#%% % ')+ &%* )- )&- )%$%+ +.&)"')+ &%* ,+* #%+ %+%% %% #%$%+% ,% % )"+ %%.)%** ,* %**$ % *+)+ &% &%+*&%+*) #%& % Decision point: Is this something the community wants to do? A successful project requires a plan that ensures the right resources are available at the appropriate times during the various phases of development. Some resources must be identiﬁed and procured during the planning phase, some during the implementation and construction phases, and some during the operations phase. Financial Planning – Financial planning includes the development of short term and long term budget estimates and pro formas. These materials form the basis of devel- oping a funding plan, as well as providing a solid base for ongoing evaluation of the success of the enterprise. !!!!!!!!!!!Page 68 of 130 Business Model – The business model selected determines the kind and type of reve- nue that will be generated by the project, and also affects the kind and type of ex- penses that are incurred. For community-owned infrastructure, there are two basic model. A “retail” network has business and/or residential customers buying services directly from the local government, which creates direct competition with local private sector providers. The alternative is the “wholesale” model, in which the community- owned infrastructure is leased out to private sector providers on a wholesale basis--the local government sells no retail services and does not compete with the private sector. Legal Counsel – Whether the retail or wholesale business model is chosen, there is a short term and long term need for legal counsel familiar with telecom and broadband business agreements and contracts. Well written contracts with service providers pro- tect the network and create a fair and equitable “level playing ﬁeld” for competitive providers. Engineering – Whether ﬁber cable is hung on utility poles or placed underground in conduit, prior to construction, the routes must be surveyed and engineered drawings must be developed to meet DOT (Dept. of Transportation) requirements and to pro- vide contractors with the information needed to construct the network to industry and state technical requirements. Network Design – The logical design of the network must be matched to the business model, as the architecture of the network may vary according to a retail or wholesale model. The network design must also meet the requirements of large and small busi- nesses, and for large businesses with extensive broadband and data needs, the network must be capable of meeting both current needs and future growth. Equipment – Once a network design is complete, an evaluation of equipment vendors must take place, ideally via a bidding process to ensure that the selected equipment will meet all of the business and technical requirements of the network, at the best possible price. A Total Cost of Ownership (TCO) evaluation should be completed to ensure that the right initial price is balanced with the longer term costs of extended warranties and technical support. The least expensive purchase price for equipment may be more expensive over time than equipment from a vendor with a higher initial equipment cost but lower support and warranty fees. Build Out – While ﬁber construction is generally much less expensive than other typi- cal community projects like water and sewer development, care must be taken to select contractors with the appropriate experience installing ﬁber in both aerial and under- ground designs. The cost of construction can vary widely, so the development of very speciﬁc bid documents that include the right engineering information as well as a carefully structured proposal response on pricing is needed to ensure the community obtains the right contractor at the right price. !!!!!!!!!!!Page 69 of 130 EARLY PHASE PLANNING This report represents the activities of the early phase planning. The work includes: Needs Assessment and Market Analysis – An evaluation of current assets and projections of future needs, based on local business and economic conditions. WideOpen Networks worked with the City, the EDC, and multiple “anchor ten- ants” to obtain an understanding of the current telecommuni- cations landscape in Bozeman. Pre-engineering Cost Estimates – Pre-engineering cost esti- mates of potential network projects provide a baseline for un- derstanding the costs of getting started, provide necessary inputs to the ﬁnancial pro forma development, and also in- form funding strategies. Financial and Business Modeling – A ten year ﬁnancial pro forma, using inputs from the business requirements analysis and the cost estimates, provides an early test of the ﬁnancial sustainability of the project and provides a long term road map for ﬁnancial management. Governance Planning (Management and Operations Over- view) – Before making a commitment to move to implementation planning, it is nec- essary to have a basic understanding of the key operations and management tasks re- lated to operating the enterprise. Mapping – Mapping of current assets, areas and business locations of needs, economic growth areas, and key customers and stakeholders informs the development of the network architecture and the ﬁnancial pro forma. Funding Strategies – Before moving to the next steps, it is vital to understand where the planning, engineering, and initial construction funds will come from. There are many options available. Next Steps – A list of key activities and milestones needed to move the project ahead. " "" ! !!!!!!!!!!!Page 70 of 130 IMPLEMENTATION PLANNING PHASE This phase produces the equipment and construction speciﬁcations needed to bid out the work of constructing the network. Business and Financial Planning – The Project Manager and Network Integrator perform detailed business and ﬁnancial planning. This includes planning how the business front of- ﬁce and back office will be run. Governance Model - formal governance model is deter- mined and legal arrangements between governing entities are negotiated and contracts signed. Funding Sources - Funding sources are identiﬁed and fun raising commences. Partner agreements which may in- clude network resources (IRUs) or dividends from net- work income are determined. Business Administration Planning - Determining how the actual network business will be operated is deter- mined at this time. Front and back office operating mod- els are identiﬁed, outsourced business functions are iden- tiﬁed and planned.. Survey and Route Engineering – An on the ground survey is needed to complete a ﬁnal route design. This work is performed by an engineering ﬁrm that also has the respon- sibility to produce the engineered design and obtain required permitting. The ﬁeld survey conﬁrms that the ﬁnal route can be built to the necessary standards and regula- tions. Construction Methodology selected (Design vs. Design/Build) - One method to shorten the design and build phases of a project are to award up front a “design build” contract where the engineering ﬁrm is also responsible for construction. While this may lead to some higher costs, it can shorten this part of the project signiﬁcantly and is often recommended for projects where time is of the essence. Engineering Drawings - After the survey work is completed, the engineering ﬁrm produces a complete set of engineered drawing that meet DOT and other local requirements. Engineered Cost Estimates – If the engineering ﬁrm will not perform the build, the full drawing set is attached to the construction bid documents and becomes the basis for the awarded construction contract. Permitting - The Engineer will prepare all required permit forms and submit the permits with the plans. Some permits will require that Bozeman Fiber pay a fee to " !# !!! !!!!!!!!!!!Page 71 of 130 the permitting entity. It is important to start the permitting process early to avoid delays. Network Architecture Design (Detailed) – Final analysis of vendor equipment is per- formed and selection is made. Equipment Selection -Analysis is performed to determine which equipment of- fers the lowest Total Cost of Ownership (typically analyzed over ten years or more). Detailed Network Architecture - The detailed network design starts with the completed network architecture and completely speciﬁes all of the equipment, cabinets, patch cables, power supplies, optical lasers, batteries, and all other neces- sary parts and equipment needed to create a functional network. The output is a complete Bill Of Materials (BOM) used to create purchase orders for equipment, as well as speciﬁcations for the conﬁguration of routers and switches. Equipment and Materials Specifications – The Engineering ﬁrm also completes a de- tailed list of all equipment required for the construction. Bill Of Materials produced for ﬁber, conduit, handholes, ﬁber splice enclosures, and related hardware needed to install the ﬁber cable underground and/or on util- ity poles. Service Provider Development – In an open access network, service providers have to be recruited and formally signed to a contract to become a provider on the network. Providers usually need “coaching” because they are typically unfamiliar with open ac- cess networks and need help understanding the unique business opportunities they represent for private sector companies. The Project Manager and Integrator will work with qualiﬁed providers to market the network and make sure that the providers have an understanding of how to prepare to interface with the network to provide services. This also includes all the base understanding of the contractual agreements between the network and the providers. !!!!!!!!!!!Page 72 of 130 CONSTRUCTION PHASE The documents produced in the Implementation Phase are used to bid out the construction work and to procure the network equipment needed to produce an operational network. Procurement – At the beginning of the construction phase Bozeman Fiber will bid out the project construction. Construction Contracts - Multiple contractors may be involved depending on how the engineering and con- struction documents were planned in earlier phases. Other Physical materials - The network integrator will also be responsible for procuring all physical assets not the responsibility of the construction contractors which may include shelters, cabinets, generators. Network Equipment - All network equipment such as servers, switches, and routers must be purchased and tracked. Operating Contracts - If outsourced business functions are to be used, the agreements have to be drafted and qualiﬁed outsourced ﬁrms need to be selected. Construction Management – The construction work is bid out and an award is made to a qualiﬁed contractor with the best price. It is common to negotiate the ﬁnal cost of this work once a ﬁrm has been selected. Engineering Inspection - Depending on how the construction contracts were awarded will determine if the engineering ﬁrm is responsible for inspecting the contractors work performed during construction. Network Equipment Installation – Network equipment is ordered from a vendor that meets the technical speciﬁcations. Equipment must be tested, installed in cabinets or shelters, powered up, and connected to the ﬁber cable. After installation and Staging - The site where equipment will be installed must be designed with the correct power circuits, racks, and grounding for equipment. Cable trays and other accessories will be installed to accommodate the physical connections to equip- ment. Installation - Equipment must be conﬁgured which may involve staging in a labo- ratory or bench. Once on site equipment will be installed in the racks, and the !!!!!!!!!!!Page 73 of 130 physical cable connections made. Equipment will then be powered up and can be conﬁgured. Conﬁguration/Integration - Prior to installation equipment can be pre-conﬁgured in a lab or staging area. After installation the initial conﬁguration is completed or conﬁrmed and connections to other network equipment is tested. Adding one de- vice can require modiﬁcations to the conﬁguration throughout the network. Testing - When equipment is installed and conﬁgured, end to end network testing of the equipment must be completed. Testing will conﬁrm that network elements are communicating properly. Testing is required not only when new network ele- ments are installed, but also when new services or features are conﬁgured on the network. Business Process Development – During the construction phase, business and opera- tional decisions must be made to produce a set of business processes that will guide the day to day operations of the network. A business process will be developed for essentially all recurring activities on the network, including new customer provisioning, service provider billing, utility lo- cating, processing invoices, and so on. Some functions can be outsourced to create local private sector jobs (e.g. ﬁeld maintenance, utility locating). Internal processes overlapping with the network conﬁguration will be created for new customers joining the network, and the deﬁnition of new services. Legal contracts and other related business documents must be developed as part of this process. Service Provider Negotiations – Negotiations with qualiﬁed service providers contin- ues. Additional development and speciﬁcation of the Master Agreements and Service Level Agreements (the contracts between the network and the Service Providers) are ﬁnalized The network and the providers enter into contractual agreements. Providers will determine what services they want to offer and will work with the Network Operators to deﬁne services and conﬁgure the delivery of the service over the network. Contracts, Agreements, and Leases – The construction phase will generate the need for a variety of legal documents. Some will be related directly to the construction (e.g. an easement agreement to have conduit cross property) !!!!!!!!!!!Page 74 of 130 Typical documents include the development of the Master Network Agreement that is used to sign service providers to the network. Other contracts would in- clude the development of a draft network operations agreement if network opera- tions is outsourced, and a similar agreement for outside plant maintenance and repairs. Marketing and Public Awareness – As the network is constructed, a modest but ongo- ing public awareness and publicity effort is required to ensure that business customers, schools, local government agencies and other potential users of the network are aware of the project and the possibility of reducing costs and obtaining more and better serv- ices. TRANSITIONING TO OPERATIONS As construction is approaching completion Bozeman Fiber must hire the appropriate ﬁrms to monitor and maintain the network. The companies responsible for the maintenance of the network will need to be under contract on day one. Different companies will have different requirements for assuming operational responsibility, but all should be under contract at least one month before the ﬁrst customer comes online. Network Monitoring – The Network Operator will need about a month before the ﬁrst customer is brought online. This time will be spent conﬁguring monitoring equip- ment, conﬁguring alerts, setting up internal processes, and bringing staff up to speed on the new environment. Outside Plant Maintenance – As soon as the contractor completes construction Bozeman Fiber will be responsible for maintaining the network. Some responsibilities such as utility locating, ﬁber repairs, and maintenance of generators, HVAC systems, and other assets will begin before the network is under full operations. Service Providers – As Bozeman Fiber signs on service providers they will need time to bring their connections into the co-lo, install equipment, and conﬁgure their net- work for the new services. If construction is involved this process could take several months. !!!!!!!!!!!Page 75 of 130 OPERATIONS PHASE Once the network is completed, service providers are connected ﬁrst and then their customers receive ﬁber connections. At that point, the enterprise becomes operational and a variety of ongoing activities begin to take place. SERVICE PROVIDER MANAGEMENT Service Providers are a vital part of any Open Access Network. In essence the Service Providers are the customers of the network. The actual network end users (institutions, businesses, and residents) are the Service Provider’s customers. Service providers sell directly to the end users--their customers. PROVISIONING - MANAGING ORDERS FOR SERVICE Once they have obtained a new customer that is passed by distribution or access ﬁber, the Service Provider contacts the network to get either a physical ﬁber connection completed (e.g. from the curb to the building) and/or a logical connection across the network to deliver the service requested by the customer (e.g. Internet, phone, data backup, etc.). This process is initiated via a self service portal, an order ticket, or some other automated mechanism (e.g. a link between the SP’s Customer Relationship Management (CRM) system and the ordering system) and ﬂows through a deﬁned process which may include external work orders to contractors and ultimately ends in a billing event when the Service Provider’s customer is active and will be billed for services. BILLING The Network Operator or Owner needs to bill for services provisioned on the network. Unlike the retail model, the bills created by the Network Operator are only created for the Service Providers. The Service Providers handle billing of their own customers. While the process of billing only the Service Providers is simpler when compared to retail billing, nevertheless this is a process that requires attention to detail on a daily and monthly basis as customers are added, dropped or changed. Bills need to include a level of detail such that an individual Service Providers can tie their own invoices to individual subscribers back to the Network invoice, potentially generate their own bills from the details in the Network invoice, audit their records against the Network bills, and work with the Network Operator in the event of inconsistencies. During the planning phase, the Network Operator needs to determine several items about billing of Service Providers such as partial month billing, credits for service outages, and credits for bad payers. CUSTOMER CAREAs the Service Providers are the customers of the Network a well designed network operations center (NOC), staffed with experienced personnel, must be in place to support the providers. !!!!!!!!!!!Page 76 of 130 The NOC operators will be available during normal business hours (Monday-Friday, 8 AM to 5 PM) to deal with routine provider needs, and the NOC will provide 24/7/365 monitoring the network and connected customers for outages and follow up repairs. MARKETING INCENTIVES The Network Operator has a role in marketing the network, even though the end users of the network are the customers of the Service Providers. Marketing incentives can be time based, geography based, or revenue based. Marketing incentives must be offered to all Service Providers. However, basing the incentives on number of customers, number of new customers, or revenue can be used to provide an incentive for the Service Providers to aggressively pursue additional customers or market share. ATTRACTION Even though the Network is operational with one or more Service Providers offering services, it is vital to the growth of the Network that the Operator/Owner continues to work to attract new Service Providers to the network. These can either be new “traditional” providers (Internet, VoIP, IPTV) or can be niche providers offering services like security (e.g. closed circuit video), healthcare, gaming or any other service which can be delivered over the network. QUALITY ASSURANCE While the Service Providers are the customers of the Network, they also can have an impact on the overall impression of the network. If a Service Provider is not paying its bills to the Network or if there are many end user customer complaints the Network Owner may, in extreme circumstances, need to intervene. Such intervention may include canceling a Service Provider’s contract with the Network (potentially switching end-users from one Service Provider to another), penalizing a Service Provider via increased costs on the Network, or other intermediate strategies to encourage good quality service. NETWORK OPERATIONS Operations can be managed in-house, but start-up networks generally ﬁnd it less expensive to out-source operations to a qualiﬁed ﬁrm. Operations must include 24/7/365 activities, and it is generally better in the ﬁrst several years, when the network is small, to use a service rather than bear the expensive of several dedicated technical staff that would be needed to cover nights, weekends, holidays, and vacations. NETWORK OPERATIONS CENTER (NOC)Network Operations Center or NOC is a 24/7/365 staffed facility with many tools to manage, operate, debug and assist the NOC staff in identifying the root cause of issues reported, in monitoring network electronics, and to keep the network running smoothly. The NOC can be an outsourced remote center or can reside on the network. !!!!!!!!!!!Page 77 of 130 HELP DESK Service providers are responsible for handling Tier 1 support to their customers--the network end users. However, when the Service Provider can not solve the problem or believes the problem is in the Open Access Network they need to be able to contact a help desk for assistance. This Help Desk is part of the NOC, and should be staffed to handle problems during both normal business hours and on nights and weekends. MONITORINGOne of the tools available to the NOC is software which monitors the active elements of the network. Some monitoring systems are available from the manufacturers of the network hardware, known as Element Management Systems (EMS), as well as systems which use standards-based software tools to monitor the network for problems. Monitoring takes a variety of forms, including a standard uptime monitor that periodically checks the status of the Network Elements as well as more sophisticated tools that monitor bandwidth, CPU cycles, temperature, fan speeds, etc. Monitoring systems are useful not only during troubleshooting with a service provider or end user but as well as providing proactive capabilities to prevent problems or outages. As an example, a sophisticated monitoring system could provide NOC technicians with alarms when bandwidth exceeds a set threshold, allowing the technician to take proactive actions to prevent an outage. TICKETING Trouble Ticketing or just Ticketing is a system or process that uses software to manage and track reported troubles, outages, orders, or questions submitted online via Web forms or via email and phone calls. NOC staff are responsible for tracking all tickets and timestamps as well as allowing the providers visibility into the system to see what action is being taken or what is planned for an outage or other problem that arises on the network. Ticketing systems include Web based portals, text messaging tools, and e-mail based responders, and can receive and respond to tickets in a variety of ways including phone calls, emails, SMS, or other means. OUTAGE REPORTINGWhen an outage is discovered via monitoring or a call to the Help Desk, outage reports can be broadcast to Service Providers or end users. This type of proactive reporting can reduce the burden of calls to the NOC by notifying the service providers of pre-existing outages. PROVISIONING Provisioning is the act of setting up services on the network. Provisioning can be for service providers, end users, or can be required for core network requirements. Small networks often rely on a manual process for provisioning but can utilize manufacturer provided Element Management Systems (EMS) or even more sophisticated systems, known as Manager of !!!!!!!!!!!Page 78 of 130 Managers (MoM). For service provider and end user provisioning, the end result is usually a billable event such as adding, changing, or terminating a end user service. ORDER MANAGEMENTWhile provisioning is the setting up of services on the actual network elements, Order Management is a higher level activity that can include dispatch of physical assets, estimating of network build costs, or processing a more complex order for Network changes. Order Management can be provided through a Ticketing system or can be a stand alone system in larger networks. PERFORMANCE REPORTING AND METRICSTo provide proactive feedback to network operators, owners, and service providers there can be systems dedicated speciﬁcally to reporting on the health and reliability of the network. Metrics can also be created out of the ticketing system, provisioning system, or order management. Overall the performance of not only the network, but also of contractors, outsourced providers, vendors, and even data on service providers can be reported on and used as a mechanism to view the health of the network and entities charged with providing services. As an example, a ticketing system report could indicate the average length of time before a ticket is addressed by NOC personnel, or the monitoring system can report on the total number and average length of time for outages in a given period. CHANGE MANAGEMENTAny time there are changes made to the network via provisioning, repair, or otherwise, it is vital that those changes be managed and tracked. Simple methods of Change Management include keeping a record of every update in a spreadsheet, or keeping conﬁguration ﬁles in a directory on a server. More complex methods involve using change tracking software to automatically capture network changes and provide capabilities for reversing changes in the event of an outage or interruption of services. NETWORK MAINTENANCE While routine maintenance (e.g. replacement of worn out equipment) may be limited in the ﬁrst year or two of operations, non-routine/emergency maintenance support must be in place as soon as the network has customers. NETWORK EQUIPMENT MAINTENANCEMaintaining network equipment involves regular patching of ﬁrmware or software upgrades as well as performing physical maintenance if required. Network elements must be patched when critical security or performance updates are released from the manufacturer. Maintenance which can potentially cause an outage need to be scheduled with the NOC and these events often occur as scheduled maintenance windows during non critical times (typically on weekends at 2-5am). Examples of required physical maintenance can include keeping equipment in clean working conditions such as cleaning fans, testing UPS systems, or replacing batteries as needed. !!!!!!!!!!!Page 79 of 130 SECURITYSecurity is both a physical and logical problem in keeping networks operational. Physical security includes protecting expensive or sensitive equipment with access controls or locks. Logical security can include required password rotation, keeping equipment on the latest security release of software, and protecting conﬁdential information of end users and service providers. Firewalls are needed to protect the network not only from outside threats, but the network needs to be protected against internal attacks as well. OUTSIDE PLANT MAINTENANCEFiber is occasionally damaged (e.g. tree limb falling on aerial ﬁber, backhoe damaging buried ﬁber), and a qualiﬁed ﬁrm must be available to make repairs within two to four hours. This service is almost always outsourced to a qualiﬁed private sector company and is referred to as “break-ﬁx” In addition to break-ﬁx underground utilities often need to be “located” when new construction, street repairs, or other activities disturbing the earth occur near buried cable. The network should belong to the local dial-before-you-dig service and should respond to tickets originating from those systems. Utilizing an accurate inventory of the network if digging will occur in close proximity to owned plant, NOC staff will dispatch a locator to locate the ﬁber cable. This is often part of the break-ﬁx contract, but can be outsourced to another entity specializing in such work. In small municipal networks, the Public Works department will often locate ﬁber optic cable as they are already locating water and sewer assets. BACKUPS AND CONFIGURATION MANAGEMENT NOC staff are responsible for keeping secure backups of all Network Element conﬁgurations, backups of critical systems mentioned in this chapter including ticketing, provisioning, and billing. Backups should be stored locally for a quick restoration in the event of a failure, but also should be kept offsite in a physically diverse location. INVENTORY MANAGEMENTKeeping track of all Network Elements and all network assets is key to keeping a Network reliable and operational. Inventory Systems should: Track equipment location, in-service dates, serials numbers, model numbers Link equipment with end-uerss or service providers Provide location reports for technicians and service providers Store logical information such as IP addresses, OS versions, etc. Managing the physical assets is also required in a network. Tracking all Outside Plant (OSP) assets reduces the time needed to ﬁnd and solve outages, and reduces the time required to provision new services, or create work orders for changes to the physical network. A network asset management system provides an overall view of the physical state of the network. Fiber Optic OSP management systems should: !!!!!!!!!!!Page 80 of 130 Track conduit, cables, buffer tubes, individual ﬁber, splices Generate reports and information for splice work BUSINESS ADMINISTRATION An open access network only has a small number of customers, which are usually just the connected service providers and perhaps a handful of local government agencies. Nonetheless, prudent and careful ﬁnancial management is needed for accounts receivables and accounts payables, along with other normal bookkeeping activities--chart of accounts maintenance, bank deposits, check writing, and other related tasks. A part time bookkeeper may be an affordable solution in the early days of operations. ACCOUNTING BUDGET SUPPORT As the Open Network is a business enterprise, maintaining an operational budget is required. The network will have operational costs such as pole rentals, locate costs, annual equipment maintenance, electric bills, debt service, or other costs. Having an accounting office is often out of the reach of a small network so these functions can be completed by an outsourced company or even completed by NOC staff. SERVICE PROVIDER BILLING Monthly bills need to be created and sent to the service providers. Tracking payment and handing billing disputes needs to be performed. Often the NOC staff are responsible for creating the bills and handing billing inquiries while an accounting office is responsible for sending invoices and tracking payments. In the event of billing disputes the NOC staff, the customer (in most cases a Service Provider), and the accountant are involved in developing a remedy for a billing dispute. MARKETING AND AWARENESS While service providers will be responsible for their own marketing and sales efforts, an ongoing modest awareness/marketing campaign is required to ensure that customer take rate targets are met. OUTREACHOutreach is often required to make sure that the local and regional community are aware of the network. Working with local economic developers, chambers of commerce, local technology companies is often required. Additionally municipal and Open Access Fiber projects receive regional and national awareness. Local, regional, state and even national elected officials need to be aware of the network, how it was funded, and how it is beneﬁting local constituents. INCENTIVESAs mentioned above in the Service Provider section, it may also become necessary for the network to offer incentives to acquire new connected businesses and residences or to attract businesses to the area. While the Network Operator/Owner will not offer services directly to !!!!!!!!!!!Page 81 of 130 end-users there may be economic development reasons to offer to fund things like the initial cost of constructing a new drop, as one example. GROWING THE NETWORKOften the network is built in stages. There may be a pilot phase or a small deployment followed by larger deployments. These deployments need to be planned and managed, but the Network Operator/Owner and board of directors should constantly be looking for new funding opportunities like state or federal grants. While the network is being expanded, the NOC staff will be responsible for bringing newly constructed segments of the network into operations. FINANCIAL MANAGEMENT AND OVERSIGHT The enterprise needs a board of directors and a senior manager responsible for day to day oversight. The senior manager should have a strong business background with experience in successfully starting and managing new businesses. !!!!!!!!!!!Page 82 of 130 Best Practice: Planning for Success With more than a dozen years of operation for a variety of community-owned network infrastructure projects around the country, there is very little “experimentation” that is still necessary. With more than three hundred communities making investments in broadband infrastructure, there is now enough information about what works and what does not work to be able to identify best practice across nearly all areas of operations, planning, management, and ﬁnance. HIRE STAFF AS A START UP BUSINESS The one area that we see causing the most operational problems is poor staffing decisions. While there is a natural impulse to think that a network infrastructure project needs someone with a telco background, someone with thirty years experience with CenturyLink is not likely to be a good choice for a variety of reasons, chieﬂy because a new broadband infrastructure venture is more like an entrepreneurial start up than a multi-billion dollar company. The project manager for the Bozeman Fiber initiative should be someone with a track record of successful business/administrative management and a demonstrable record of innovation. They should be ﬂexible, knowledgeable about local government, and be comfortable with technology. They do not necessarily need to have a technical background. They should be comfortable supervising someone with a technical background. FUND FOR EARLY OPERATIONS Successful projects provide enough funding to support eighteen to twenty-four months of operations. There are a variety of ﬁxed costs (staffing, outside plant maintenance, network operations, utility costs, office costs, etc.) that accrue beginning on day one, when revenue is low. While some community projects have been successful getting into the black operationally in year one, it sometimes takes longer. USE GRANTS AS SUPPLEMENTAL FUNDING Grants can be extremely important in the early stages of an effort to support planning activities and/or to fund a Phase One build out initiative. But grants rarely will allow spending on operational expenses. Grants should be used to supplement other sources of funding and as one time cash injections to support very speciﬁc goals. Communities that have relied too heavily on “the next grant” as a key source of expansion or operational funding usually experience severe ﬁnancial problems. MANAGE FINANCES Broadband infrastructure projects require hard-nosed ﬁnancial oversight. Projects that have developed ﬁnancial problems have usually over-estimated early revenue, under-estimated expenses, and/or simply spent too much without aligning expenses with revenue. Volunteer board members who are contributing time while also maintaining a full time job (often in local !!!!!!!!!!!Page 83 of 130 government) may not provide enough ﬁnancial oversight to ensure that staff use the budget as a tool to measure ﬁnancial performance. USE TAKE RATE TARGETS AS A KEY PERFORMANCE MEASURE The initial business plan should have a minimum three to ten year projection of connected premises (i.e. the take rate), including local government facilities, large and small businesses, health care facilities, and residential customers (if ﬁber to the home is part of the business plan). Take rates directly affect revenue: if take rate projections are not being met, revenue shortfalls are likely. Take rates (both raw numbers and month to month growth rates) should be analyzed at least quarterly (monthly would be preferable). PLAN FOR MARKETING AND PUBLIC AWARENESS EFFORTS If the Bozeman Fiber initiative moves forward, it will be necessary to have a modest but regular marketing and awareness campaign to ensure that area businesses know that the new Bozeman Fiber network is available, that they know what service providers are available on the network, and they know how to order service. While service providers will be responsible for sales (that is, selling their services and signing up their own customers), the network itself will have to market general awareness of the network. PLAN FOR EXPANSION Most community-funded efforts start small. This minimizes ﬁnancial risk and gives the senior leadership the opportunity to learn on the job. But some projects tend to stall out after the ﬁrst year or two. Part of the problem we have observed is that the volunteer boards realize that assisting with the management of this new start up business is not quite the same as serving on the board of the local food bank or some other charitable enterprise. The underlying problem is twofold: even small networks have a certain amount of ﬁxed operational costs regardless of size, and the network needs enough revenue to pay those expenses, as well as make principal and interest payments on any loans. The second problem is that network infrastructure wears out and needs routine maintenance. Lack of funding to keep the network in good condition will degrade service over time. The solution is to have an expansion plan (which could be modest) that contributes to revenue growth over time. BUDGET FOR CUSTOMER CONNECTIONS If the network is going to achieve ﬁnancial sustainability, new customers have to be added on a schedule that matches the ﬁnancial projections. This means the project must have the funds to support adding customer “drops” from the distribution ﬁber on poles or underground in right of way at the edge of the street or road. This is where careful budgeting and adequate funding is a necessity. The worst possible outcome is to have business and residents requesting a connection to the network but having a lack of the funds to make that “last hundred feet” connection. There are a variety of charge back and fee-based strategies for raising the capital needed to complete drops, and a plan that supports funding of new customer connections is essential. !!!!!!!!!!!Page 84 of 130 Appendices BROADBAND AND GROWTH POLICY RECOMMENDATIONS BROADBAND FACILITIES INTRODUCTION Under the Montana Code Annotated, local units of governments are encouraged to, “plan for the future development of their communities” so that, “new community centers grow only with adequate highway, utility, health, educational, and recreational facilities”. The MCA also states that, “the needs of agriculture, industry, and business be recognized in future growth” and “that the growth of the community be commensurate with and promotive of the efficient and economical use of public funds.” (Source: MCA 76-1-102) The City of Bozeman recognizes that broadband is critical infrastructure to provide for the future needs of business and industry. Broadband is a term to describe the high-speed transmission of digital data across networks. It is technology neutral and includes both wired and wireless mediums. Broadband networks provide access to the Internet and can also provide point-to-point connections between sites. Broadband service is often associated with high-speed Internet access that is always on and faster than traditional dial-up access. In today’s world, broadband infrastructure is as important as roads, water, and sewer and has become essential for work, education, health care, and public safety. In order to facilitate the deployment of broadband, the City undertook a planning effort to increase access to affordable, high-speed, ﬁber optic infrastructure to deliver broadband services throughout the city. The study examined the feasibility of different models of deployment to identify a cost-effective and sustainable model of providing broadband services. This broadband element establishes the framework for the city to move forward in making sure a broadband network will have adequate capacity to meet the future needs of businesses, institutions and citizens. The broadband goals and objectives in this appendix promotes coordination with public agencies and private sector companies, establish priorities for investments of public funds and provides the legal basis for amending codes and standards to facilitate the construction of a broadband network. The recommendations advance the vision of the Bozeman Community Plan for a strong, diverse and sustainable economy and for infrastructure that will support a growing community. BROADBAND NEEDS ASSESSMENT BROADBAND TRENDS Numerous studies indicate that demand for bandwidth is doubling every two years, and that the FCC expects that the typical bandwidth needed by businesses and residents in 2015 will exceed 50 megabits. This represents an increase in bandwidth requirements that is ﬁfty times !!!!!!!!!!!Page 85 of 130 (50x) what it was in 2010 (current average bandwidth to homes and businesses then was 1-2 megabits.) A number of factors are driving these trends. As business travel is becoming more expensive, more companies are relying on video conferencing to conduct meetings and reduce travel costs. HD quality business video- conferencing systems require dramatic increases in bandwidth that are often not af- fordable or in most cases even available in certain areas of the City of Bozeman. There is an increase in the number of teleworkers. More and more workers and busi- ness people are working from home, either on a part time or full time basis. Home businesses and work from home job opportunities are growing rapidly, but most of those jobs require a wired Internet and a wired phone connection to qualify. Some major businesses in other parts of the U.S. are already actively planning to have 20% of their workforce work full time from home to reduce employee travel costs and office energy costs. Additionally, many states have are actively promoting telework initia- tives to reduce traffic congestion and auto emissions. Americans are watching more than 10 billion videos per month over the Internet. Globally, video will be 73 percent of all Internet traffic (both business and consumer) by 2017, up from 60 percent in 2012. The sum of all forms of video (TV, video on de- mand [VoD], Internet, and P2P) will continue to be in the range of 80 and 90 percent of global consumer traffic by 2017. In 2008, U.S. industries invested over $455 billion dollars in telecom and technology investment, including over $60 billion in broadband. A 2011 report from the McKinsey Global Institute studied the Internet’s growing impact on the economy. The report found that the Internet accounted for 21% of GDP growth in the last ﬁve years for mature countries, and this number is only ex- pected to climb higher. $8 trillion dollars is exchanged through e-commerce annually. Traffic from wireless devices will exceed traffic from wired devices by 2015. In 2015, wired devices will account for 46 percent of IP traffic, while Wi-Fi and mobile devices will account for 54 percent of IP traffic. In 2010, wired devices accounted for the ma- jority of IP traffic at 63 percent. NEXT GENERATION BROADBAND NETWORKS The FCC’s prediction for increased bandwidth indicates that current DSL and cable modem services will be inadequate, especially for businesses, but also for home uses of telecom services. Current DSL offerings are in the range of 384 kilobits to 1.5 megabits for most residential users, 768 kilobits to 3 megabits for business DSL users, and there are severe distance limitations on DSL. Higher bandwidth are now possible, but as the DSL bandwidth goes up, the distance it can be delivered goes down and many neighborhoods are unable to subscribe to these higher speeds. !!!!!!!!!!!Page 86 of 130 Current wireless offerings are in the range of 1/2 megabit to 3 megabits, and future WiMax services will only be able to deliver 4-8 megabits. Some wireless providers are rolling out 10-15 megabit services, but wireless does not scale up well with respect to cost. As bandwidth increases, the cost of the equipment also increases, and even a 15 megabit service is well short of the FCC projections of the need for 50 megabits of bandwidth in the near term. Current average bandwidth for cable modem services is typically 3 to 5 megabits. Although some companies are now advertising packages of 20 to 30 mbps, it is important to note that cable providers make heavy use of the phrase “up to” in their advertising. In reality, that amount of bandwidth is shared among many users (often 200 or more) in a neighborhood, which results in much lower average speeds, and during peak use times in residential areas, the actual bandwidth available to a single household may be much less. The challenge for the City of Bozeman is to ensure that the businesses, residents, and institutions in the community have a telecommunications infrastructure in place that will be able to handle the 50x bandwidth increase projected by the FCC by 2015 and to meet the goal of the FCC National Broadband Plan for 100 mbps to the home and one gigabit per second to anchor institutions. Next generation” is the term used to describe future planning for the next step in network connectivity and infrastructure. This suggests an emphasis on deploying ﬁber-to-the premise (FTTP). Fiber provides greater access to connectivity and allows the infrastructure to be in place to accommodate future communication needs, capacities, and innovations. An increasing number of cities are deploying ﬁber networks to improve broadband speed and obtain a competitive advantage in attracting businesses. Next generation broadband reaps in a number of substantial beneﬁts in functionalities including: Dramatically faster ﬁle transfer speeds for both uploads and downloads The ability to transmit streaming video Means to engage in true-real time collaboration The ability to use many applications simultaneously The City of Bozeman faces a challenge in economic development infrastructure with primarily “little broadband” (i.e. DSL, wireless, and cable services) while many communities, regions, and countries have already made the decision to focus resources on the development of “big broadband,” which is typically ﬁber with a minimum capacity of 100 megabits or Gigabit to the premises. Any investments in broadband and telecommunications infrastructure should be able to scale gracefully to meet business and economic development needs for decades. This drives the solution towards an integrated ﬁber and wireless system, rather than a wireless only service !!!!!!!!!!!Page 87 of 130 orientation. Wireless is able to provide basic Internet access needs, but is not able to support advanced video and multimedia services. PUBLIC INPUT A businesses survey was conducted as part of the broadband planning process. The ﬁndings below conﬁrm that businesses are becoming more reliant on broadband services and that there is a growing demand for bandwidth. The majority of businesses were not satisﬁed with existing broadband services indicating a need for investment in a next generation broadband network. ‣63% of respondents are not satisﬁed with their services. ‣28% of respondents answered that they needed better telephone service. ‣79% of respondents answered that they needed better Internet/data service. ‣66% of respondents have access through DSL and Cable, while only 8% have access through ﬁber. ‣Connection speeds are distributed fairly evenly between 1.5 and 50Mbps. Many re- spondents have a 3-5Mb, a 5-10Mb, or a 10-25Mb service. ‣Only 6% of respondents answered they were “very satisﬁed” with the current spend of their Internet service. 31% of respondents replied that they were “not at all satisﬁed” with the current speed of their Internet service. ‣Respondents generally use the Internet for communication via email, access to news and current events, research, ordering and managing inventory, and maintenance of a web presence via a blog or other site. ‣48% use the Internet to connect to remote sites. ‣75% of respondents indicated that they would be somewhat or very willing to pay more for faster, higher quality Internet access. ‣87% of respondents indicated that they found Internet technology to be a very impor- tant factor in the success of their company over the next ﬁve years. ‣89% of respondents indicated that an affordable broadband Internet connection would be beneﬁcial to their organization. ‣31% of respondents are already saying they need a redundant path to the Internet. ‣85% of respondents say they need some kind of access from home. EXISTING PLANS As indicated in the table below, investing in broadband infrastructure is consistent with existing city plans, particularly when these investments can be coordinated with other infrastructure improvements. Table 1: Summary of Relevant Provisions of City Planning Documents !!!!!!!!!!!Page 88 of 130 Bozeman Community Plan 8.3 Economic Development Goals and Objectives Goal ED-1: Promote and encourage the continued development of Bozeman as a vital economic center. Objective ED-1.4: Encourage ongoing improvements in private infrastructure systems, such as telecommunications, and promote state-of- the-art facilities. Objective ED-1.5: Encourage, through the use of incentives, the development of business and industry that provides wages that are proportionate to, or are higher than, the cost of living and provide options to expand skills and opportunities for Bozeman’s workforce. 12.3 Public Services & Facilities Goals and Objectives Goal PS-1: Facilities and Services – All public facilities and services provided under the authority of the City of Bozeman shall be provided in a reliable, effi- cient, cost-effective and environmentally sound manner. Objective PS-1.1: All service and facilities provided under the authority of the City of Bozeman shall have facility plans which will evaluate current and future needs and best management practices for providing services. Objective PS-1.3: Strive to coordinate the provision of services with other gov- ernmental agencies to prevent overlap, excessive cost, and to provide the highest quality services. Goal PS-2: The City shall work with other service and utility providers to ensure the adequate and safe provision of services. Rationale: Public and private utilities often are located within the same rights- of-way and easements. Coordination between providers is essential to prevent conﬂicts, damage, and injury. Services are necessary to support urban develop- ment. Objective PS-2.3: Private Utilities — Facilitate the provision of adequate private utility services within the City while respecting the character of Bozeman. Bozeman Economic Develop- ment Plan Goal #2: Maintain and upgrade infrastructure to support current and future needs of business. Strategy 2.A: Maintain infrastructure (city service or private service) at safe and efficient levels to satisfy the current and future needs for economic expansion. The condition of streets and sidewalks, water and sewer, gas and electric distribu- tion, communications, and solid waste disposal all affect how efficiently busi- nesses conduct their operations. It also contributes to business retention and re- cruitment efforts. Bozeman Capital Improvement Plan Goal 4: Anticipate future service demands and resource deﬁciencies and be pro- active in addressing them. Goal 7: Provide excellent and equitable public services which are responsive to the community within available resources. !!!!!!!!!!!Page 89 of 130 Downtown Bozeman Improve- ment Plan Strategy: Coordinate Infrastructure Improvements While reliable and safe core infrastructure is critical for redevelopment, the dis- ruption of maintenance and improvements cost businesses losses of revenue. Considerable time and effort should be invested to balance the need for infra- structure work and the resulting disruptions. To this end, public works and utility infrastructure should be assessed and a comprehensive maintenance and upgrade plan should be devised. All parties should regularly coordinate efforts to mini- mize construction and disruption in the downtown core. North 7th Redevelopment Plan Goal #10. Coordinate public and private improvements. Public and private im- provements should be coordinated so that investments are maximized. For ex- ample, completing a link in a public walkway may occur when an adjacent prop- erty redevelops. 19TH ST. - REDEVEL- OPMENT PLAN Goal 3: Provide for the establishment of commercial and business park areas that enhance the Bozeman economy while remaining sensitive to existing and proposed neighborhoods, and while respecting environmental and historic con- ditions in the area. Objective D: Provide a framework of infrastructure and development guidelines that will encourage environmentally friendly companies to locate and thrive within the study area. Goal 5: Provide for Public facilities which can accommodate projected growth and future development in the area. Objective A: a. Promote orderly and adequate timing and sizing of infrastructure development. Objective C: Develop infrastructure in accordance with adopted capital facilities plans. BROADBAND GOALS AND OBJECTIVES In addition to the provisions in existing planning documents, the Bozeman Broadband Plan has identiﬁed more speciﬁc goals and objectives that would facilitate the deployment of broadband infrastructure and support efforts of private and public partners in meeting the needs for reliable, robust and affordable bandwidth. Goal 1: Take measures to ensure that businesses, institutions and residents of Bozeman have affordable access to “state of the art” broadband infrastructure to meet current and future needs. Rationale: Broadband is essential infrastructure that businesses, institutions and residents rely on work, learn, access health care and other city services. Businesses need next generation broadband to be competitive in today’s economy and to develop innovative applications. Public agencies require broadband to cost effectively provide services and adopt sustainable practices. !!!!!!!!!!!Page 90 of 130 Objective 1.1: Work with local public agencies, schools, health care providers, economic development officials , utilities and service providers to develop a broadband vision and plan for the Bozeman area. Objective 1.2 Require new residential subdivisions and commercial development projects to include broadband infrastructure components necessary to support next generation broadband. Objective 1.3 Support efforts to provide community anchor institutions such as the library, schools, hospital and government buildings with next generation broadband infrastructure, Objective 1.4 Promote competition for broadband services that will foster affordable Internet access and advocate for reliability through redundant infrastructure. Objective 1.5 Adopt policies, regulations and construction standards to coordinate deployment of broadband infrastructure with road, water and sewer construction projects in order to achieve cost efficiencies. Objective 1.6 Create and maintain an inventory of public and private broadband assets including ﬁber/conduit in the right-of-way, towers, potential co-location sites for wireless antennas, and other assets. Objective 1.7 Promote the orderly and appropriate development of wireless facilities to achieve reliable access in a manner that will protect public health and safety and prevent visual blight. Goal 2: Promote adoption of broadband technologies to support business innovation, enhance delivery of local services, realize cost efficiencies, engage citizens and support sustainable applications. Rationale: The beneﬁts of investments in next generation broadband infrastructure will come from the adoption of new technologies. Technology applications have the potential to reduce costs for public agencies and can expand the range of educational, health and e-government services that residents and businesses can access on-line. New broadband technologies can reduce energy usage, conserve water and promote sustainable practices. Objective 2.2: Encourage telecommuting, telework and low-impact home businesses to create jobs and to reduce transportation impacts and improve air quality. !!!!!!!!!!!Page 91 of 130 Objective 2.2: Support innovative applications such as such as smart grid, smart water, automation, remote monitoring with sensors and big data analysis that can conserve resources. Objective 2.3: Support public hot-spots and computer centers so all citizens can access technology and fully participate in the community. Objective 2.4: Continuously improve local government use of e-government applications to provide transparency, improve services and engage citizens. SAMPLE RESOLUTION TO AMEND GROWTH POLICY A RESOLUTION OF THE CITY COMMISSION OF BOZEMAN, MONTANA TO AMEND THE GROWTH POLICY TO ADD APPENDIX N: BROADBAND FACILITIES, AS ALLOWED BY TITLE 76, CHAPTER 1, PART 6, MONTANA CODE ANNOTATED (M.C.A) WHEREAS, the City of Bozeman Planning Board has been created by Resolution of the Bozeman City Commission as provided for in Title 76-1-101, M.C.A; and WHEREAS, Section 76-1-106(1), M.C.A state that the Planning board is responsible for preparing growth policies, if requested by the governing body; and WHEREAS, the Bozeman City Commission adopted the Bozeman Community Plan, a growth policy, on June 1, 2009 by Resolution 4163; and WHEREAS, the Bozeman Community Plan, Objective ED-1.4, states, “Encourage ongoing improvements in private infrastructure systems, such as telecommunications and promote state-of-the-art facilities.” WHEREAS, the Bozeman Community Plan, Objective ED-1.5, states “ Encourage, through the use of incentives, the development of business and industry that provides wages that are proportionate to, or are higher than, the cost of living and provide options to expand skills and opportunities for Bozeman’s workforce..”; and WHEREAS, the Bozeman Community Plan, Objective PS-1.1, states “All service and facilities provided under the authority of the City of Bozeman shall have facility plans which will evaluate current and future needs and best management practices for providing services.”; and WHEREAS, the Bozeman Community Plan, Objective PS-2.3, states — Facilitate the provision of adequate private utility services within the City while respecting the character of Bozeman. !!!!!!!!!!!Page 92 of 130 WHEREAS, the Bozeman Economic Development Plan states, “ Strategy 2.A: Maintain infrastructure (city service or private service) at safe and efficient levels to satisfy the current and future needs for economic expansion. The condition of streets and sidewalks, water and sewer, gas and electric distribution, communications, and solid waste disposal all affect how efficiently businesses conduct their operations. It also contributes to business retention and recruitment efforts.”; and WHEREAS, the Bozeman Capital Improvement Plan states, “Goal 4: Anticipate future service demands and resource deﬁciencies and be proactive in addressing them.”; and WHEREAS, consistent with the goals and objectives of the Community Plan, Economic Development Plan and Capital Improvement Plan, the City of Bozeman undertook a planning effort to increase access to affordable, high-speed, ﬁber optic infrastructure to deliver broadband services throughout the city. WHEREAS, the City of Bozeman retained Design Nine to develop a broadband plan to examine the feasibility of developing a ﬁscally sustainable broadband infrastructure network and recommend broadband facilitation strategies, based on an assessment of community needs; and WHEREAS, this study recommended that the Growth Policy be amended to include the recommended goals and objectives for the development of broadband infrastructure and facilities; and WHEREAS, (insert clauses documenting the public hearing dates and actions from the Planning Board and City Commission) NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Bozeman, Montana that: Section 1 That pursuant to Title 76, chapter, Part 6, MCA and Chapter 17 of the Bozeman Community Plan it adopts the “Appendix N: Broadband Facilities” as an amendment to the Growth Policy. (See Exhibit A) Section 2 Severability. If any provision of Appendix N or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect the other provisions of this growth Policy which may be given effect without the invalid provision or application and, to this end, the provisions of this growth policy are declared to be severable. Section 3 Effective Date This neighborhood plan shall be in full force and effect upon passage. !!!!!!!!!!!Page 93 of 130 SUMMARY OF PUBLIC INPUT AND KEY INFORMANT MEETINGS Name & Agency Discussion Summary Core Stakeholder Group (7-17-14) Met with following members of Core Stakeholder Group to review overall planning process, identify broadband issues and discuss how a broadband network could meet future needs. Brit Fontenot, City of Bozeman Stuart Leidner, Prosper Mike Hedegaard, NRMEDD Steve Johnson, Bozeman Schools Warren Vaughnan, Gallatin County Daryl Schliem, Chamber of Commerce Chris Naumann, Downtown Bozeman Scott McMahan, City of Bozeman Lester Jerome, Bozeman Deaconess Brad Somers, Bozeman School District Rob Gilmore, NRMEDD Peter Martinson, Gallatin County IT Jerry Sheehan, Montana State University Craig Woolard, Director of Public Works, City of Bozeman Community Meeting (7-17-14) Thirty-three people were in attendance. The consultant team made a pres- entation on the overall planning process and goals of the study. The follow- ing questions/issues were raised at the meeting. Is there a goal for the price structure (price per mbps)? How will a local network tie into the northern tier network? What is the timeframe for a project? How much will a project costs? What is the ownership model? Don’t want a failure like Provo, UT. Will the focus of the study be on business/institution/small business needs? Redundancy is an issue. !!!!!!!!!!!Page 94 of 130 Provider Meeting (7-17-14) Twenty-ﬁve people were in attendance representing broadband service providers. There was discussion on the existing services that are already being offered and questions regarding the different models that may be instituted to deploy a ﬁber network. The following providers were repre- sented at the meeting. Little Apple Technologies Montana Opticom Pine Cove Global Net 3-Rivers Com Fatbeam TCT SkyNet Communications JSLLC Blackfoot Charter CenturyLink Montana Opticom (7-17-14)Tour of Montana Opticom facility with Jim Dolan I-Connect (7-17-14)Tour of I-Connect Facility City of Bozeman (8-13-14) Information Technology Staff - Discussed current broadband usage and future needs including a network to connect city facilities. Public Works Director – Discussed construction standards for installing conduits and ﬁber networks. Reviewed GIS data requirements for broad- band plan. Discussed coordinating ﬁber network build out with capital improvement projects and potential public works applications on a net- work that connects city facilities. Downtown Bozeman Part- nership (8-13-14) Discussed potential to coordinate ﬁber network with downtown im- provement projects and potential use of TIF revenue to fund part of the network. Discussed downtown businesses that may be potential users of the networks. Deaconess Hospital (8-13-14) Discussed current broadband usage and projected broadband needs. Identiﬁed hospital facilities that could be linked thru a ﬁber network. Explored role of hospital in deployment of ﬁber network. Discussed criti- cal need for redundant network for hospital and health networks. Dis- cussed needs of staff/doctors that require better Internet access from home. !!!!!!!!!!!Page 95 of 130 Prospera Business Network (8-13-14) Reviewed location of industry and business clusters that may need access to a ﬁber network. Discussed survey of businesses to determine demand and the importance of broadband to economic development. Bozeman Library (8-14-14) Discussed current broadband usage and projected broadband needs. Dis- cussed need for wireless access points (hot spots) and library mobile net- works to connect to ﬁber network. Discussed the library’s role as an in- novation center and as the key institution to address digital divide issues. Reviewed potential grants and funding sources that the library may be able to access to help fund network. Montana State University (8-14-14) Reviewed MSU’s current broadband network and connectivity to North- ern Tier Network. Reviewed off-campus facilities that require connec- tivity to network. (Gallatin College, ag farms, research stations.) Dis- cussed the needs of faculty, staff and students who live off-campus and poor Internet connectivity. Reviewed future needs for bandwidth. Andy Holloran (Developer) & Scott Wilson (CTA Group) (8-14-14) Would like to have model specs to make buildings ﬁber ready. Fiber ac- cess is a necessity for class A office space and condos being marketed to professionals. Would support FTTH requirements for residential devel- opments. Bozeman School District (8-14-14) Discussed current broadband network and future needs. Discussed po- tential of ﬁber network to connect schools. Discussed potential role of school as a user of the network. Discussed reliability and costs issues. Northwest Energy (8-14-14) Reviewed joint use polices and process for use of utility poles to deploy ﬁber network. Hoplight Industries (8-14-14) Discussed the company’s decision to move operations from Bozeman to Butte in order obtain to cheaper bandwidth. There is a need for redun- dancy and a growing need for bandwidth. Montana would be a good location for data centers but need better state middle mile. Professionals are doing to demand high quality of life and will want broadband access at home for telecommuting. Granite TCS, Bill Procunier (8-14-14) Reviewed trends in broadband usage among ﬁrm’s clients including grow- ing need for bandwidth and reliability at cost effective prices. First Interstate Bank (8-19-14) Met with Bruce Parker, Regional President and Matt Johnson, Downtown Branch President, to discuss the project. Mr. Parker raised the idea of hav- ing local banks get together to ﬁnance project under CRA. Workiva (8-19-14)Met with Cole Feisthamel. Workiva was formerly known as Web Filings. Currently using CenturyLink 100Mbps service with Charter 30Mbps/ 5Mbps as backup. NDA prevents them from discussing cost. Believe they need 1Gbps, but can’t afford currently. Work from home/remote is a re- quirement. Have other sites in Ames, IA and Boulder, CO. !!!!!!!!!!!Page 96 of 130 Deaconess Hospital (9-23-14) Deaconess is moving to a cloud based Electronic Medical Record (EMR) system. Need redundant serve – both route diversity and technology diversity. They need to connect different facilities throughout town to the hospital network. They are working with Blackfoot to meet immediate needs. Montana State University – College of Arts And Archi- tecture (Nancy Cornwall) 9-23-14 Storing more data in cloud and requires huge bandwidth for transfer of ﬁles. i.e. – Digital Sounds of Montana is an acoustic atlas with digital audio ﬁles. MSU is partnering with NOA and archiving videos of deep water exploration. There is a videographer business cluster in Bozeman that has demand for large bandwidth. Distance learning and streaming lectures create bandwidth needs – especially at homes. Faculty and stu- dents need broadband at home. City of Bozeman 10-28-14 Wendy Thomas – Community Development Director. Discussed process for incorporating broadband goals into city’s Growth Policy and options for amending municipal codes to facilitate deployment of broadband networks. Treasure State Internet 10-28-14 Discussion on the existing services that Treasure State is offering in Helena and answered questions regarding the different models that may be insti- tuted to deploy a ﬁber network. !!!!!!!!!!!Page 97 of 130 CASE STUDIES CITY OF EAGAN, MN The City of Eagan began planning for a city-owned ﬁber network in 2008 at the urging of key business leaders who represented both large and small businesses, including some Fortune 500 companies. One of the ﬁrst efforts by the City included asking the private sector, including the incumbents, to help solve the bandwidth affordability problem. Both the primary cable and telephone company in Eagan declined to offer any substantive improvements. Several other private sector ﬁrms also submitted proposals, but none were deemed adequate to meet the needs of a diverse business community employing tens of thousands of employees. During the planning process, the City also began to examine strategies to attract one or more commercial data centers to the community, and it was determined that the availability of City- owned competitive ﬁber would assist in that effort. In 2011, the City allocated funds to construct AccessEagan, which was planned to be 17 miles of high performance, business class Gigabit ﬁber capable of serving a large percentage of the business and commercial areas of the city. The network was constructed to meet the most demanding technical requirements of Eagan’s larger businesses, with a Gigabit connection as standard for any connected business, and the active Ethernet network has ample capacity to provide 10Gig, 40Gig, 100Gig, and wavelengths as needed to meet business requirements. Operating as an open access, lit circuit network, four private sector providers have signed master agreements to sell services, and the City began taking orders from those providers for the ﬁrst connected businesses in 2013. The City also announced in 2013 that a data center was coming to the City, and was to be located in an existing building that was passed by the City- owned ﬁber. Attribute Description Governance AccessEagan is City-owned; operated as an enterprise fund. Funding Funds from cellular providers who rent space on City struc- tures was used to construct the initial build out. Business Model Operating as an open access network, with all business serv- ices provided by private sector companies. Management The City IT department manages the network. New con- struction (e.g. drops to businesses) is contracted out. Technology AccessEagan is an active Ethernet network. GOOGLE FIBER INITIATIVES In 2013, ﬁber deployments began to accelerate in the wake of Google Fiber’s announcement that they were expanding their ﬁber deployments to Austin, Texas and Provo, Utah. Google’s ﬁrst project was in Kansas City, Missouri. !!!!!!!!!!!Page 98 of 130 In Austin, AT&T, the incumbent provider there, immediately announced they would begin deploying ﬁber in that city, despite the fact that the company had been previously stubborn about insisting that “nobody needs ﬁber.” AT&T might have to update that mantra to “Nobody needs ﬁber in our markets until someone tries to compete with us, and then we will suddenly discover ﬁber is very important.” Google is currently evaluating proposals from more than thirty other large metro areas, and is expected to start additional ﬁber deployments in a handful of them. A Google-connected home or business gets low cost Internet, but the service agreement gives Google wide latitude to examine all of the traffic moving over the customer connection (e.g. Web pages, email addresses, documents, spreadsheets, etc) so that the ﬁrm can mine that data to target specialized advertising as well as sell the data to third parties. Attribute Description Governance In Google Fiber cities, Google is the retail provider. While Google touts its projects as public-private initiatives, Google networks are entirely in the private sector. Funding Google uses its own funds to build and operate the net- works. Business Model The primary service is Internet access. Google does have a streaming TV offering (Chromecast) but it is not, strictly speaking, comparable to a traditional cable/satellite TV serv- ice. Customers get whatever Google gives them, and the company encourages the use of Google-branded services like Google Docs, Google+, and gmail. Management The network is managed entirely by Google staff. Technology Google networks include both GPON and active Ethernet technologies. !!!!!!!!!!!Page 99 of 130 DANVILLE, VIRGINIA The City of Danville, Virginia is operating an open access, open services network (www.ndanville.net) focused on creating the right kind of economic development incentives and accompanying infrastructure that will help retain existing businesses and help attract new ones. Danville has a City-owned electric utility, and the growing ﬁber network is being managed as part of the electric utility operations. Using a multi-phase approach, the City ﬁrst hooked up government offices and local schools in 2004, and in 2006 began planning for extending the high performance all ﬁber network to local businesses and residents throughout the electric service area, which includes a large part of very rural Pittsylvania county. The ﬁrst businesses began to get hooked up in late 2007, and Danville had ﬁber passing parcel in its business parks before the end of 2008. The City-County business incubator was one of the ﬁrst locations to receive the ﬁber services. The network has been operating in the black and has generated enough revenue to make an annual contribution to the City’s General Fund, and a portion of the nDanville revenue is being used to expand the network. The City has completed the construction of Fiber To The Home (FTTH) to some of its residential neighborhoods (a total of about 1600 premises), and has been able to sign up an IP TV provider as well as Internet and telephone providers for the residential customers. The City is not selling any services to businesses or residents; all services are offered by private sector service providers that use the network and pay the City for the use of the network via a revenue sharing agreement. The availability of business class ﬁber has been a signiﬁcant boost to the downtown area of Danville, and the City has counted at least 150 new jobs within walking distance of the Main Street commercial area of town. Attribute Description Governance nDanville is part of the City of Danville Utilities Department. Funding The City of Danville Utilities Department has used a combina- tion of loans and revenue to fund the construction of the net- work. Revenue from key institutions like the City and County schools have been a signiﬁcant factor in the development of the network. Business Model nDanville is an open access, open services network. All services provided to residents and businesses are offered by private sector providers. Management Network operations are managed by the City. Some outside plant maintenance is performed by City utility crews, and some work is outsourced to qualiﬁed private sector ﬁrms (e.g. splicing, some construction work). !!!!!!!!!!!Page 100 of 130 Attribute Description Technology nDanville is an active Ethernet ﬁber network, providing a 100 megabit symmetric connection as the standard service. Gigabit and 10Gigabit point to point connections are also available. nDanville has two colocation facilities available to businesses and providers, and the nDanville MSAP (Multimedia Services Access Point) provides access to more than twenty-ﬁve local, regional, and national service providers. ROCKBRIDGE AREA NETWORK AUTHORITY Rockbridge County, Virginia and the two independent cities of Lexington and Buena Vista (both within the borders of the county) formed a broadband authority in 2009 after completing an initial feasibility and market demand study. The authority consists of elected officials from each of the three localities, as well as representatives from the business community and Washington & Lee University. Rockbridge was able to build upon the study for the submission and successful award of a $7 million grant. The grant, which included $7 million in ARRA Federal stimulus funding and $3 million in local match, constructed 60 miles of backbone ﬁber and provide another 35 miles of Gigabit last mile connections to 53 community anchor institutions and 175 homes and businesses. The project includes a state of the art data center and will also construct 29 DSL cabinets throughout the county, to help extend service into the underserved regions of Rockbridge County. Construction began in 2012 and the network’s ﬁrst customers were connected in the summer of 2013. The data center in Lexington is the most sophisticated facility of its kind in this part of Virginia. The 95 miles of ﬁber being built passes more than 11,000 homes and businesses and is “last mile ready,” meaning businesses and residents can get the standard Gigabit ﬁber connections quickly and easily once initial construction is complete. Attribute Description Governance The network and data center is owned and operated by the Rockbridge Area Network Authority (RANA). Funding Approximately $500,000 in local match from the three local governments and $2.5 million in funding from Washington & Lee University helped get the project started. These local funds were used as match to obtain $7 million in Federal ARRA stimulus funds. Business Model Services are sold to business and residential customers by private sector service providers using the RANA network for transport Management The network began operating in the summer of 2013, and most operations and maintenance has been outsourced. !!!!!!!!!!!Page 101 of 130 Attribute Description Technology The network is an active Ethernet system with a standard Gigabit symmetric ﬁber connection. 10Gig connections are also available. LAFAYETTE, LOUISIANA Lafayette, Louisiana is perhaps one of the best known community broadband projects in the United States. The City announced its intentions to go into the broadband business in 2004, and was promptly sued by the incumbent cable provider. The court case ground on slowly, and it was not until the City had spent nearly $4 million on legal fees that the Louisiana Supreme Court decided that the City had the right to compete directly with private sector telecom companies. Since then, thousands of customers have been connected and Lafayette is now famous for having some of the lowest rates for Internet access in the United States, with a 50 megabit symmetric package of Internet access for only $58/month. The network has now been operational since early 2009. Cox Communications, famous in Louisiana for regular rate increases, froze its rates in Lafayette for several years following the city’s initial announcement that it would offer telecommunications services. Meanwhile Cox continued to raise its rates in other parts of the state. The result was that even before Lafayette’s system began operating it had saved its residents and businesses nearly $4 million. Attribute Description Governance The network is owned and operated by the City of Lafayette and is part of the Lafayette Utilities Department. Funding The City raised $110 million in funding to build the net- work. The long term plan is to pass all 57,000 homes in the city. Business Model Services are sold directly by the City in a traditional triple play retail model. Management The City Utilities Department operates the network and handles outside plant maintenance. Technology LUSFiber is an active Ethernet system with a standard 100 megabit symmetric ﬁber connection. Gigabit connections are also available. !!!!!!!!!!!Page 102 of 130 PALM COAST, FLORIDA In 2008, the City of Palm Coast began exploring the potential of making existing City-owned ﬁber assets available for business and commercial use. Existing Palm Coast businesses were expressing concern to City leaders about the high cost of Internet access and the limited bandwidth available in the City. After a six month study of various business and ﬁnancial options, the City decided to focus on developing the network as a “carrier class” commercial network capable of supporting virtually any level of business service that might be needed. As of early 2012, all four redundant ﬁber loops had been completed. The City invested in a dedicated colocation facility with both shared rack space and private cages for service providers, and purchased “carrier class” network switches and routers to light up the ﬁber. Palm Coast FiberNET was made available for service in May, 2010 (http://www.ci.palm-coast.ﬂ.us/ PalmCoastFiberNET/), and had three service providers committed on day one. Palm Coast FiberNET provides service to City buildings and locations, and successfully won a bid to provide services to Flagler County Public Schools. The local hospital also uses the network to connect hospital medical records and data services with several local health clinics and medical offices. FiberNET was operating in the black operationally in year one, and continues to do so as it enters its ﬁfth year of operation. Attribute Description Governance Palm Coast FiberNET is owned by the City of Palm Coast. Funding City enterprise funds were used to pay for the initial $2.5 million in ﬁber construction, equipment, and the colocation facility. Business Model FiberNET is operated as an open access network. Providers pay a monthly fee per customer, based on connection size. Management The City IT Department manages network operations, and private sector contractors are used for outside plant mainte- nance and construction work. Technology FiberNet is an active Ethernet network that provides sym- metric 100 megabit, Gigabit, and 10Gigabit connections as standard. DWDM circuits can be provided upon request. POWELL, WYOMING Powell, Wyoming has built a 100% ﬁber network throughout this city of 2,650 households and 5,500 people. Citizens supported the City-led effort because of poor service from the incumbent providers. The City government expects a ﬁnancial return of more than $22 million over thirty years on the $4.9 million initial investment required to build the network. Powell is an electric city, which makes it easier to get started because the electric utility poles, equipment, and crews can be used to help install and maintain the system. !!!!!!!!!!!Page 103 of 130 The network has been so popular with businesses and residents that in 2010, the Powell City Council authorized the buy back of $6.5 million in twenty year bonds used to build the system. At the same time, the City re-negotiated the exclusive use agreement with the local service provider (TCT West) on the network. The local company had exclusive (monopoly) access to the network in return for guaranteed fees paid to the City. This minimized ﬁnancial risk to the City but did not create competition for services. Under the new arrangement, Powellink will be operated as a fully open access network, TCT will no longer be the exclusive provider. Instead TCT will not have to make guaranteed payments to the City. Instead TCT will pay for access to the network at the same rate as any other provider. Attribute Description Governance Powellink is owned by the City of Powell and is operated as one of the city’s enterprise funds. Funding Revenue bonds were used to ﬁnance the $6.5 million build out. Business Model Started as a monopoly with a single provider, but has been converted to an open access network with each provider paying a share of costs. Management The City is contracting with a local provider to handle net- work operations. Some maintenance of outside plant is per- formed by City utility crews. New construction is con- tracted out. Technology Powellink is a ﬁber GPON (Gigabit Passive Optical Net- work). CHATTANOOGA, TENNESSEE The City of Chattanooga is an electric city with its own electric utility. As the electric utility began to examine the feasibility of using smart meters to better manage the electric grid and to reduce energy costs to its customers, it realized that just implementing smart meters to all its customers was a signiﬁcant portion of the cost of building a general purpose all ﬁber network that would also support smart meters and the utility’s grid management needs. The utility was able to secure a $110 million grant from the U.S. Department of Energy, bonded an additional $220 million, and by 2013, more than 56,000 homes and businesses had been connected with Gigabit ﬁber, and more than 170,000 meters had been connected. A residential Gigabit ﬁber connection costs $70/month. The electric utility estimates that it is saving as much as half of its overtime costs per year because of improved energy management. The utility owns and operates the ﬁber network, and customers are billed for services directly by the electric utility. The primary service offering is Internet access, but customers can also purchase TV and voice services. A triple play package of Internet, voice, and TV sells for $125/ month. Most customers purchase a 100 meg Internet service. The network is operated as a !!!!!!!!!!!Page 104 of 130 retail triple play business model, and would not be considered open access, as all services are provided by the electric utility. Attribute Description Governance The network is owned by the City electric utility. Funding A U.S. Department of Energy grant provided $110 million, and the City issued bonds for an additional $220 million dollars to connect more than 170,000 customers with smart meters and to provide ﬁber connectivity. Business Model The network is operated as a retail triple-play business, with customers buying all services directly from the electric util- ity. Management All management, maintenance and repairs are handled in- house by the electric utility. Technology Most customers get a GPON (passive) Gigabit ﬁber con- nection. The utility can provide active Ethernet connections to businesses who need it. !!!!!!!!!!!Page 105 of 130 FINANCING OPTIONS “THERE IS NO MONEY FOR BROADBAND….” The ﬁnancial analysis in the ﬁrst section of this report provides a conservative 30 year expenditure estimate for routine and normal telecom services for businesses, residents, schools, and institutions in Bozeman. Over the next three decades, more than a billion dollars will be spent on telecom services. This is estimate that does not include any adjustments for inﬂation or price increases, nor does it take into account the ever expanding demand for new kinds of services. The model looks only at current demand and today’s retail prices. A community investment in a community-owned and managed digital road system, where all services are provided by the private sector, would have substantial beneﬁts. What the table shows is that the city’s businesses, residents, and institutions are already spending substantial sums of money on broadband–over $33 million a year. This amount represents an estimate of what is being spent by all public, residential, institutional, and business customers for landline services, including telephone, TV, and Internet access across the city. In fact, just the money spent in less than two years in Bozeman would more than pay for the complete cost of building the proposed new all-ﬁber network to most homes and businesses in the city. FUNDING OPTIONS A wide variety of funding strategies are available for building telecom infrastructure, but there are some emerging rules of thumb: The ﬁrst money is the most difficult, and some local funds are almost always required. Most granting agencies want to see collaboration across political boundaries, as the market for network services usually spans those boundaries. Once even a modest network infrastructure has been built and has some customers and service providers, it becomes much easier to raise additional funds. So the most important funding strategy is to fund something and get it built. It is quite feasible to ﬁnance a large part of expansion with funds directly from cus- tomers (i.e. property owners) that receive ﬁber connections. The Utopia project has been very successful with the approach in suburban communities in the Salt Lake City area. Those local funds can be leveraged to acquire the additional capital needed to support network expansion. The one time connection fee is identical in concept to the use of pass-by and tap fees used to help ﬁnance water and sewer construction. Partnerships with entities like K12 schools and the local government are critical fund- ing sources, especially for a “Phase One” initiative. The opportunity is to dramatically improve the quality of service (e.g. 10x to 50x bandwidth increases for local K12 !!!!!!!!!!!Page 106 of 130 schools for what they are paying now), and/or the opportunity to reduce the overall cost of telecommunications by improved efficiencies for combined voice and data uses. One funding approach used by other projects is to get an up front cash payment from local anchor tenants that is equivalent to several years of savings from their telecom budget. Many public safety agencies are embarking on extremely expensive upgrades from analog voice radio systems to digital voice radio systems. There may be additional re- dundancy and resiliency beneﬁts by taking ﬁber to more of the public safety towers, thereby increasing capacity and reliability. If public safety agencies partner with the ﬁber initiative, it may be possible to reduce the cost of these ﬁber upgrades via grant funding from the U.S. Department of Justice. Funding Source Description Notes Revenue Bonds Long term debt instruments guaranteed with revenue from the network. Requires some equity/funding from other sources. General Obligation Bonds Long term debt guaranteed by local taxes. Generally more difficult to get approval from elected officials and voters. Tax Increment Financing Funds generated from a taxes levied within a speciﬁed area of the city Funds can only be used for improvements within the speciﬁed district. Special Property Assessment Some communities are levying a special tax assessment for a period of several years to pay for a ﬁber to the home initiative. In most jurisdictions this would require a referendum and public vote. Cash Funding provided directly by the local government(s). Many community broadband projects have been funded in part or in whole by the local government. These are often treated as a loan to be repaid with revenue. Revenue Bond Guarantees Third party guarantees on revenue bonds; if revenue fails to meet ﬁnancial targets, bond guarantor makes debt payments. Guarantors could be local or state governments. Does not require a direct cash outlay. Guarantor must have a good credit rating. New Markets Tax Credits Tax credits are sold to investors, and funds are used for the network. Project must meet eligibility requirements and typically takes a year to plan and to receive approval. !!!!!!!!!!!Page 107 of 130 Funding Source Description Notes State Funds State agencies may be source of planning & capital funds. Capital funds are usually small, but direct grants from the legislature are possible. Federal Funds Grants and loans of various kinds are often available from Federal agencies. Federal grant programs and funding tend to change with changes in administration. Can take 1-2 years for approval. Municipal Leasing Local governments can borrow money and pledge the asset as collateral. Can be used for funding speciﬁc (limited) projects, like ﬁber to a school system or government offices. Commercial Loans Local banks are often willing to assist with funding. Usually requires pledging network assets as collateral. Must be able to show a revenue stream to pay back the loan. Good for small, high priority network extensions with guaranteed customers. Private Sector Financing A public/private partnership approach offers the possibility of attracting a mix of private investors as well as some local government ﬁnancial support. It depends on the corporate structure, but local businesses and investors could become shareholders or partners in the new telecom ﬁrm, effectively vesting community control for the effort. Because most of the funds will be used to create hard assets, it will be possible to attract institutional investors for larger amounts if a good business case is constructed. Grants and Donations Citizens and local foundations will sometimes provide grants. Local foundations may require tying funds to a speciﬁc purpose. Sales Tax Assess a small increase in the local sales tax to pay for construction, or use existing sales tax revenues as a bond guarantee. May require a voter referendum. REVENUE BONDS Many community projects are already being ﬁnanced with revenue bonds, including Monticello, Minnesota, Powell, Wyoming, and the Utopia project (14 towns and cities in Utah). Revenue bonds are repaid based on the expectation of receiving revenue from the !!!!!!!!!!!Page 108 of 130 network, and do not obligate the local government or taxpayers if ﬁnancial targets are not met. In that respect, they are very different from general obligation bonds. Many kinds of cityprojects (water, sewer, solid waste, etc.) are routinely ﬁnanced with revenue bonds. We believe most community projects will ﬁnance a signiﬁcant portion of the effort with revenue bonds. Obtaining funding using revenue bonds requires an excellent municipal credit rating and an investment quality ﬁnancial plan for the operation and management of the network. Revenue bonds must be used carefully, and a well-designed ﬁnancial model is required to show investors that sufficient cash ﬂow exists to pay back the loans. Some issues to consider are: Revenue bonds are paid back solely from system revenue. A very solid business plan is needed. Management, marketing, and operations of the network must be professional and with careful attention to meeting operational and ﬁnancial targets. A Bozeman venture will need some local fund-raising to support the credit rating/credit enhancement needed for the initial borrowing. This local fund-raising should be targeted to support some initial construction and operations to show that the city can plan, construct, and manage a state of the art network, and that the project can attract both customers and service providers. Market conditions at the time the initial bonding is attempted can affect the cost of the bonds and the success in selling those bonds. GENERAL OBLIGATION BONDS General obligation bonds are routinely used by local governments to ﬁnance municipal projects of all kinds. G.O. bonds are guaranteed by the good faith and credit of the local government, and are not tied to revenue generated by the project being funded (i.e. revenue bonds). G.O. bonds obligate the issuing government and the taxpayers directly, and in some cases could lead to increased local taxes to cover the interest and principal payments. Even though G.O. bonds are quite common for more traditional community infrastructure, local leaders and taxpayers have typically been resistant to using them to ﬁnance community telecom projects. G.O. bonds often require a voter referendum, which raises the bar even higher, but some community telecom projects, notably the City of Lafayette, Louisiana, prevailed in a voter referendum to build a city ﬁber network despite heavy advertising against the referendum by incumbent providers. TAX INCREMENT FINANCING Tax Increment Financing (TIF) allows a local government or redevelopment authority to generate revenues for a deﬁned area targeted for improvement, known as a TIF district. As improvements are made within the district, and as property values increase, the incremental increases in property tax revenue are earmarked for a fund that is used for improvements within the district. Expenditures of TIF-generated revenues are subject to certain restrictions and !!!!!!!!!!!Page 109 of 130 must be spent within the district. Bozeman has several TIF districts, potentially providing a means of ﬁnancing some broadband infrastructure improvements within those districts. Any infrastructure constructed with TIF funds would belong to the City of Bozeman. SPECIAL PROPERTY ASSESSMENT This is likely to become a more common ﬁnancing strategy as the need for ﬁber to the home becomes viewed as more of a necessity than a luxury. The citizens of Leverett, Massachusetts passed a special ﬁve year tax assessment in 2013 to build ﬁber to every property. CASH Many community broadband projects have been funded in part or in whole by cash from the local government. This source of funding is often treated as a loan that is repaid over time from from revenue earned from the network. It is good practice to create an enterprise fund that manages the loan, network revenues and network expenses in a completely separate set of ﬁnancial books to ensure that there is no cross-subsidy from general fund revenues and to provide full transparency for audits and management oversight. REVENUE BOND GUARANTEES Revenue bond guarantees are not a direct source of funds but can be extremely valuable as part of a revenue bond offering. A bond guarantee could come from local governments that are involved in the network development, a state ﬁnancing authority that helps underwrite municipal bond offerings, or as a special authorization from the state legislature. Some community network project bond offerings have been guaranteed by tax revenues from the local communities (e.g. the Utopia project in Utah). NEW MARKETS TAX CREDIT New markets tax credits are a form of private sector ﬁnancing supported by tax credits supplied by the Federal government. The New Markets Tax Credit (NMTC) Program permits taxpayers to receive a credit against Federal income taxes for making qualiﬁed equity investments in designated Community Development Entities (CDEs). The CDEs apply to the Federal government for an allotment of tax credits, which can then be used by private investors who supply funds for qualifying community projects. Substantially all of the qualiﬁed equity investment must, in turn, be used by the CDE to provide investments in low-income communities. The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year credit allowance period. In each of the ﬁrst three years, the investor receives a credit equal to ﬁve percent of the total amount paid for the stock or capital interest at the time of purchase. For the ﬁnal four years, the value of the credit is six percent annually. Investors may not redeem their investments in CDEs prior to the conclusion of the seven-year period. Throughout the life of the NMTC Program, the Fund is authorized to allocate to CDEs the authority to issue to their investors up to the aggregate amount of $19.5 billion in equity as to which NMTCs can be claimed. !!!!!!!!!!!Page 110 of 130 STATE FUNDS Many local broadband projects are receiving help from state sources of funding, particularly for early stage planning, but some funds are often available for pilot projects and speciﬁc expansion projects that meet certain kinds of public safety or economic development criteria. As a couple of examples, the Virginia Department of Housing and Community Development (DHCD) has been providing early phase planning funds to communities that commit to following a speciﬁc planning process supplied by DHCD. The South Carolina Department of Commerce has also been providing some support for similar local efforts in South Carolina. State agencies may also be able to assist with applying for Federal funds. Community Development Block Grants (CDBG) are now being provided for some kinds of local broadband efforts. CDBG grants have to meet eligibility requirements (e.g. Low and Moderate Income areas, distressed downtown areas, etc.). Some community broadband projects have also successfully received direct grants from the state legislature. FEDERAL FUNDS Several different Federal agencies provide some support for community or regional broadband efforts. Some other Federal agencies also provide funds for telecom, and the city may be able to qualify for some of them by collaborating with the right mix of partners. The FCC recently distributed $400 million for community and regional telehealth and telemedicine projects across the U.S. In the past, earmarks have been a valuable source of funding, albeit a highly unpredictable one. In the current political climate, earmark funding has been very difficult. The Eastern Shore of Virginia Broadband Authority was able to obtain several million dollars in earmarks funds to help build its 80 mile ﬁber backbone, but it took more than two years to get the funds approved and allocated. Earmark funds can be approved but not allocated, which has sometimes caused problems–approval by Congress for the earmark does not automatically ensure that the Federal agency serving as the administrator of the funds receives a budget allocation. In some cases, earmark funds that have been allocated can be re-allocated by the receiving agency for a related purpose. Strong Congressional support is needed for earmarks. Federal funds usually require long lead times to obtain (12 to 18 months is typical) and are best used for speciﬁc opportunities where the funding guidelines match well with a speciﬁc local need or opportunity. It seems unlikely that there will be another round of ARRA-style broadband stimulus funds, given the budget difficulties of the Federal government. MUNICIPAL LEASING Communities routinely use municipal leasing to fund a wide variety of needs, including water and sewer projects, buildings, equipment, and vehicles like police cars, ﬁre trucks, and public works equipment. Municipal leases can take the form of a straight loan, but for telecom projects, one option called a “moral obligation” lease may be more appropriate. In a moral obligation lease, the network itself is used as collateral to guarantee the loan, rather than !!!!!!!!!!!Page 111 of 130 requiring the use of general funds to pay back the loan if the network does not perform as expected. Obtaining approval for a moral obligation loan requires an excellent municipal credit rating and an investment quality ﬁnancial plan for the operation and management of the network. This approach would be more appropriate for building extensions of the network related directly to local government needs. It is not likely to be viable as a primary means of ﬁnancing. PRIVATE SECTOR FINANCING If a public/private partnership approach is chosen, a substantial portion of the early development funds would likely come from private sources, which could include local investors and partners, larger institutional investors (e.g. pension funds), or groups of private equity investors. For early fundraising, long term notes offered to local investors is an option. In this approach, the network offers long term notes (e.g. ﬁfteen or twenty year terms) with interest- only payments for several years; repayment starts after the interest-only period. This enables the network to raise funds relatively quickly and the interest-only period allows the network to develop adequate cash ﬂow before having to make loan payments. Commercial loans from local banks are an option that could provide funds for small, urgent short term opportunities (e.g. building a short ﬁber run to reach a business that needs improved connectivity to add jobs). If a business case can be developed that shows how the improvements or extensions will increase revenue to repay the loan, this form of ﬁnancing should be easy to obtain. BUSINESS CONTRIBUTIONS Some businesses recognize the value of having community ﬁber at their premises because they may be able to obtain previously unaffordable services and/or lower the cost of existing services. If the savings are substantial, some businesses may be very willing to pay pass by and connection fees to obtain access to the community ﬁber, and we have spoken to businesses in other communities that have expressed willingness to make no strings attached contributions to the local effort. However, such contributions are usually linked to speciﬁc plans to pass the businesses with ﬁber within a reasonable time frame. GRANTS AND DONATIONS Grants and donations can provide funds for planning and for targeted construction projects (e.g. ﬁber to a local hospital, a community institution, etc.). Community foundations will often contribute funds to local technology projects. Sometimes the expenditures have to be tied to speciﬁc foundation goals (e.g. improved K12 education), but often local foundations will accept grant applications for a wide variety of local projects. Some community efforts have also received private donations, although these are usually modest, and have also usually been provided to support a speciﬁc need or project. !!!!!!!!!!!Page 112 of 130 SALES TAX The Arrowhead Electric Coop in rural Minnesota is paying for a full ﬁber build out to all homes and businesses by working with the local county government (Cook County) to collect a special 1% sales tax. The tax is actually used for a variety of infrastructure improvements, with the broadband build out using about 48% of the funds collected. The broadband portion of the sales tax is used to underwrite the cost of the CPE (Customer Premise Equipment), which is the device installed at the residence or business. This approach lowers the overall capital cost and reduces the ﬁnancial risk for the electric coop. The Utopia project in Utah has been ﬁnanced in large part by using loan guarantees backed by existing local sales tax revenue. This approach does not require changes in how existing sales tax revenue is used unless the ﬁber project runs into ﬁnancial difficulties; in that case, the localities collecting sales taxes would be obligated to use some of the sales tax collected to make loan payments. In Minnesota, creating this kind of sales tax levy requires state-level legislative approval. !!!!!!!!!!!Page 113 of 130 DEMOGRAPHIC ANALYSIS POPULATION In the last thirteen years, the City of Bozeman experienced more population growth than the state and nationally. However, population is expected to increase by more than 9% by 2018, which exceeds the amounts projected for the state and nationally. More speciﬁcally, the City of Bozeman is expected to have a population increase of nearly 3,748, which help compensate for the slower rate of population growth between 2010 to 2013. As the population continues to grow, more and more residents may feel the need to work from home. The infrastructure to support business practices from home must be in place. Otherwise, residents may feel compelled to seek relocation in places with better resources available to support work from home. Improved and more affordable broadband services will play a key role in supporting work-from-home jobs and new business and entrepreneurial activities in the city in the coming years. Year City of BozemanCity of Bozeman MontanaMontana NationalNational 2018 2013 2010 2000 Population % Change Population % Change Population % Change 42,824 9.59%1,055,900 4.36%328,268,483 3.82% 39,076 4.75%1,011,746 2.26%316,199,485 2.42% 37,305 26.20%989,415 9.67%308,725,722 9.75% 29,560 902,163 281,302,576 0% 8% 15% 23% 30% City of Bozeman Montana National 9.75%9.67% 26.20% 3.82%4.36% 9.59% Population Change 2013-2018 2000-2010 Source US Bureau of Census 2000, 2010 and 2013 Decennial Census SF1 DP-1 *US Census Bureau Population Estimates Program *Weldon Cooper Center for Public Service, UVa !!!!!!!!!!!Page 114 of 130 HOUSEHOLD SIZE AND GROWTH TRENDS The number of households in the City of Bozeman is expected to rise in the next four years, while the number of persons living in the average household will remain close to the same. The size of an average household and the number of households are important data indicators when predicting broadband take rates and modeling potential income. Most services are subscribed on a per household basis, rather than on a per person basis. When calculating infrastructure investment costs, household statistics are also important because duct and ﬁber connections are made to the household (premises). Projected steady growth in households suggests that the county will see steady demand for connections (as opposed to a situation where the number of households is shrinking). The table below shows housing projections using census data. 2000 Census 2010 Census 2013 Estimate 2018 Projec- tion 2000 to 2010 2013 to 2018 Total House- holds Size of House- hold: 1 Person 2 Person 3 Person 4 Person 5 Person 6 Person 7 + Per- son Average House- hold Size Average Length of Residence (in years) 11,722 15,846 16,662 18,545 35.2%11.3% 4,027 5,251 5,501 6,284 30.4%14.2% 5,743 5,768 6,081 6,662 0.4%9.6% 2,632 2,577 2,724 3,021 -2.1%10.9% 1,856 1,558 1,638 1,793 -16.1%9.5% 711 492 511 560 -30.8%9.6% 183 145 150 162 -20.8%8.0% 61 56 57 63 -8.2%10.5% 2.28 2.18 2.18 2.16 -4.4%-0.9% n/a 8 8 10 n/a 27 !!!!!!!!!!!Page 115 of 130 0 0.5 1.0 1.5 2.0 2.5 3.0 2000 Ce n s u s 2010 Ce n s u s 2013 Es ti m a t e 2018 Proj e cti o n 2.162.182.182.28 Average Household Size 0 4,750 9,500 14,250 19,000 2000 Ce n s u s 2010 Ce n s u s 2013 Es ti m a t e 2018 Proj e c ti o n 18,545 16,66215,846 11,722 Growth in Households !!!!!!!!!!!Page 116 of 130 AGE DISTRIBUTION The City of Bozeman’s population is less than the the state and national averages for middle aged adults between the ages of 35 to 54. In addition, the City of Bozeman has slightly lower percentages of children and adolescent age groups and larger percentages of people in young adulthood. People between the ages of 20 to 34 make up 41% of the population, but this may be due to the presence of Montana State University. Different age groups use the Internet differently, and only high speed broadband can cater to the needs of each. Since a signiﬁcant portion of the City of Bozeman contains a demographic that is generally employed or pursuing higher education, broadband infrastructure will become essential in ensuring the resources are available to sustaining current businesses, attracting new businesses, and drawing new students to the city. Maintaining the growth of Montana State University is vital to Bozeman’s economic vitality, because a large portion of job creation and wages are driven by research activities at the university. While the City of Bozeman has fewer residents 55 and older, the city must be cognizant of the future as middle age populations begin to age. Based upon federal legislative regulations, more healthcare services are encouraged to be performed electronically to reduce costs and offer greater assistance to the elderly. The City of Bozeman may ﬁnd it strategic to invest in broadband infrastructure that will support telehealth and telemedicine applications that will cater to populations who may need healthcare the most in the upcoming years. In addition, younger generations are often avid consumers of online video and most working-aged people will beneﬁt greatly from a high speed connection to their home. During our work in other areas, local real estate agents consistently report that many home buyers will NOT look at homes that do not have affordable, high performance broadband connections, especially younger, ﬁrst time home buyers. So broadband availability (or the lack of it) is changing where people choose to live. City of Bozeman Montana National Under 19 20 to 34 35 to 54 55 to 64 Over 65 22.6%24.8%26.4% 41.0%19.4%20.5% 19.8%25.7%27.3% 8.1%14.5%12.2% 7.8%15.0%13.2% Source US Bureau of Census 2013 Decennial Census SF3 DP-2 !!!!!!!!!!!Page 117 of 130 0% 10% 20% 30% 40% 50% Under 1920 to 3435 to 5455 to 64Over 65 Age Demographics City of Bozeman Montana National !!!!!!!!!!!Page 118 of 130 EDUCATION The City of Bozeman exceeds the state and national averages in producing individuals with bachelor’s and graduate degrees. Again, this may be attributed to the fact that Montana State University is located within the City of Bozeman. However, the city signiﬁcantly trails behind the state and national averages in obtaining high school diplomas. Greater availability of broadband is important to education because increased awareness and connectivity would allow residents to complete or improve their education and skill set by attending online classes. More and more higher education institutions are incorporating online coursework in their strategic plans. In fact, the Montana University System offers distance learning courses every semester too allow students to get ahead or stay ahead. The Montana University System has eleven campuses that offer distance learning. More than 8,000 students enroll in distance learning courses each semester with over 700 course options. In addition, the Montana University System offers almost 100 degree and certiﬁcate program that can all be attained online.1 As a result, students in the City of Bozeman are more easily able to earn degrees from a GED to a PHD from accredited institutions without ever attending the physical campus. Increased connectivity could also attract a diverse mix of residents (e.g., business people and entrepreneurs who can work from home). City of Bozeman Montana National Grade K - 8 Grade 9 - 12 High School Graduate Some College, No Degree Associates Degree Bachelor's Degree Graduate Degree 0.5%2.0%4.7% 1.9%5.7%8.2% 14.6%29.8%28.3% 6.2%25.0%21.2% 6.2%8.0%7.6% 31.3%19.8%17.8% 19.4%8.9%10.5% Source US Bureau of Census 2013 Decennial Census SF3 DP-2 Grade K-8 Grade 9-12 High School Graduate Some College; No Degree Associates Degree Bachelor’s Degree Graduate Degree 0%5%10%15%20%25%30%35% City of Bozeman Montana National !!!!!!!!!!!Page 119 of 130 1 http://mus.edu/online/ MEDIAN HOUSEHOLD INCOME The Median Household Income in the City of Bozeman is comparable to the state average, but much less than the national average. This income disparity should be an important consideration for broadband expansion. City investments in broadband infrastructure could spur increased competition and lower prices for residents and businesses, thus making access more affordable. This may be especially important to limited income students. Improved Internet access within the city would continue to shift some employment and job opportunities towards office and professional employees, especially since professional business services is the fastest growing industry in the area. Home-based businesses and working from home jobs, either part time or full time, could contribute more to the local economy, and affordable, high performance “big broadband” at home is already considered a requirement among white collar professionals. City of Bozeman, 2010 City of Bozeman, 2013 Montana, 2010 Montana, 2013 National, 2010 National, 2013 Median Household Income $41,657 $45,387 $43,194 $44,863 $51,362 $52,018 Source US Bureau of Census 2013 Decennial Census SF3 DP-3 $40,000 $47,500 $55,000 $62,500 $70,000 City of Boz e m a n , 2 0 1 0 City of Boz e m a n , 2 0 1 3 Montana, 20 1 0 Montana, 20 1 3 National, 20 1 0 National, 20 1 3 $52,018$51,362 $44,863$43,194$45,387 $41,657 Median Household Income Median Household Income !!!!!!!!!!!Page 120 of 130 FAMILIES BELOW POVERTY LEVEL The following table compares the poverty level for the county to the state, and national averages. The City of Bozeman appears to have a higher poverty rate compared to state and national averages. Low income is a signiﬁcant concern to the residents in the City of Bozeman. Broadband access can facilitate work-from-home businesses, provide access to online degree programs, and attract more business investment and job opportunities to the area. City of Bozeman Montana National Persons below poverty level 19.9%14.8%14.9% 0% 25% 50% 75% 100% City of Bozeman Montana National 15%15%20% Persons Below Poverty Line Persons below poverty level Source US Bureau of Census, State and County Quickfacts Accessed 2014, Data from 2013 !!!!!!!!!!!Page 121 of 130 EMPLOYMENT GROWTH The City of Bozeman has a higher percentage of individuals employed in the labor force than the state and nationally. The city may need to pursue investments in broadband infrastructure that will continue to attract employers to locate to the area to produce jobs so that there is continued employment opportunities. In addition, the broadband infrastructure will also serve as an attraction for individuals willing to relocate to the area for the jobs available from greater broadband connectivity. A joint CMU/MIT study released in 2005 showed that regions with good distribution of broadband service enjoyed more economic growth than regions without quality access to broadband services. A study by the Phoenix Center showed that broadband was also an important tool for job- seekers; those looking for jobs were more likely to ﬁnd work than those on dial-up or those without any Internet access. City of Bozeman Montana National Employed in the Labor Force 71.9%64.7%64.1% 0% 25% 50% 75% 100% City of Bozeman Montana National 64%65%72% Employed in the Labor Force Source US Bureau of Census 2000-2014 State and County Quickfacts !!!!!!!!!!!Page 122 of 130 BUSINESS ESTABLISHMENT DISTRIBUTION The City of Bozeman has 2,786 total businesses with the greatest proportion of businesses in the ﬁeld of services. The trend is toward smaller businesses, and most job creation is in the category of small businesses (25 employees or less). Increased broadband availability and increased competition among providers could lower costs for existing businesses, making it easier for them to fund business expansion. Improved affordability and availability of broadband in the county may also help the localities attract new small businesses, especially business owners looking for a good quality of life. Business Establishments City of Bozeman Montana National Forestry and fishing 38 14,180 1,942,061 Mining 3 6,240 514,465 Construction 160 24,824 6,229,040 Manufacturing 107 24,028 13,748,767 Transportation, communica- tions & other services 77 25,132 6,919,385 Wholesale Trade 116 17,953 5,584,653 Retail Trade 472 80,661 22,432,145 Finance, insurance & real estate 286 36,160 8,254,449 Services 1,527 186,579 54,127,420 !!!!!!!!!!!Page 123 of 130 EMPLOYMENT BY INDUSTRY The City of Bozeman’s strongest industry based on employment are services based. The services industry also dominates in Montana and nationally. Services encapsulates a number of different sectors which include professional, scientiﬁc, technical, educational, healthcare, social assistance, and accommodation of food services. Former lucrative trades like agriculture, forestry, mining, and manufacturing are no longer a major source of employment in the city. This is an indication that the City of Bozeman is moving away from traditional forms of employment, and towards employment areas that are more technical and require broadband services to keep up with a globalized economy. Professional services are needed by Knowledge Economy businesses and entrepreneurs, and special attention should be paid to this sector to ensure that local businesses have access to the services they need to grow. Entrepreneurial businesses tend to outsource more kinds of services that small businesses did in the past. By ensuring that high quality professional services remain available (e.g. business focused accounting and bookkeeping services, business oriented legal practices, receptionist services, copy and shipping services, temp worker services) may be able to better attract Knowledge Economy businesses. Broadband infrastructure can impact the growth of jobs in services. As more organizations are dependent upon using the Internet to communicate and expedite daily tasks, there will be a greater demand of hiring staff to provide services. City of Bozeman Montana National Agriculture, forestry, fishing and hunting, and mining Construction Manufacturing Wholesale Trade Retail Trade Transportation and warehousing, and utilities Information Finance and insurance, and real estate Professional, scientific, and management, and administrative and waste management services Educational services, and health care and social assistance Arts, entertainment, and recreation, and accom- modation and food services Other services, except public administration Public Administration 2.0%7.0%2.0% 5.0%8.0%6.0% 5.0%4.0%10.0% 2.0%2.0%3.0% 14.0%12.0%12.0% 3.0%5.0%5.0% 1.0%2.0%2.0% 5.0%5.0%7.0% 13.0%8.0%11.0% 26.0%23.0%23.0% 15%12%9% 4%5%5% 4%6%5% !!!!!!!!!!!Page 124 of 130 Agriculture, forestry, fishing and hunting, & mining Construction Manufacturing Wholesale Trade Retail Trade Transportation & warehousing, & utilities Information Finance & insurance Professional & Scientific Services Educational services, & health care & social assistance Arts, entertainment, & recreation, & hospitality Other services, except public administration Public Administration 0%8%15%23%30% Employment by Industry City of Bozeman Montana National !!!!!!!!!!!Page 125 of 130 NETWORK TECHNICAL DESIGN AND RECOMMENDATIONS EQUIPMENT RECOMMENDATIONS CUSTOMER AGGREGATION / DISTRIBUTION EQUIPMENT With a compact and highly scalable design The Calix E7 Ethernet Service Access Platform is well suited to provide scalable customer aggregation networks. The ﬂexibility of the Calix E7 platforms available in either a Chassis or a Virtual (or stackable) Chassis form factor will allow Bozeman to utilize the same logical platform in different environments simplifying service delivery. Each of the 20 slots can support up to 24 point-to-point Active Ethernet subscribers with a 48 port line card in development. That gives each E7-20 the capacity of serv- ing 480 subscribers at 1GB. Utilizing a GPON card in any of the 20 slots can support up to 256 subscribers pro- viding a total of 5120 GPON subscribers. Line cards supporting up to 1024 subscrib- ers is being developed allowing 20,480 subscribers on a single chassis. Line cards can be mixed and matched in a common chassis – no common control equipment required. Line cards can be added or replaced without uninstalling/installing power, alarms, or cables – reducing MTR from hours to minutes. Subscribers are easily aggregated and network resources efficiently shared across pro- tected trunk facilities. The Calix E7 platforms allow the ﬂexibility of utilizing GPON line cards and a GPON architecture if some areas require PON architectures due to exiting ﬁber optic availability or if the low density doesn’t justify home runs back to a sub-station location. For MDU or very dense locations, Calix provides VDSL equipment which can be implemented into the architecture. CUSTOMER PREMISES EQUIPMENT Calix offers a wide variety of customer premises equipment (CPE) for residential as well as many options for MDU, Office Parks, or large businesses. Residential CPE are available in both indoor and outdoor conﬁgurations and can be pre-conﬁgured with battery backup. Indoor Residential CPE are available with home gateway, built in WiFi (802.11 a/b/g) and a dual line POTS port (internal SIP controller). Business class CPE are available in indoor and outdoor formats and many options are available including rack mount and wall mount with multiple GE ports. Additional Business class CPEs are available with multiple synchronous ports (E1/T1) and multiple POTS ports. !!!!!!!!!!!Page 126 of 130 All Calix ONT optics in the 700GX and 800GE family are multi-sensing (AE and PON) and auto-attenuating with a maximum range of either 50km (or in some cases 80km). This simpliﬁes deployment in remote areas as CPE devices do not have to be pre-conﬁgured with optics prior to deployment. CORE ROUTING EQUIPMENT The network architecture selected for Bozeman will support the future needs of the project for years to come by implementing a core routed layer. The network core can be any vendor offering standards based interoperability with the distribution layer, but Design Nine has successfully integrated Calix equipment with Juniper in other client’s networks. We would recommend a Juniper MX 3D Universal Edge Router. In the core network the MX (eg. MX480) will be the handoff point between customers on the network and service providers, and therefore cannot be susceptible to failures. To answer this requirement the chassis based MX routers feature fully redundant cooling systems, power supplies, and routing engines. As an example the MX480 has a system capacity of 1.92 Terabits per second to meet the immediate and future bandwidth needs of the project. NETWORK MANAGEMENT CONSIDERATIONS PROVISIONING Service provisioning on an open network is signiﬁcantly more complex than a closed/single provider network. Provisioning on a small scale can be handled by network staff or by an outside company, however as the network grows tools must be implemented to cope with the increasing demand. A well implemented provisioning system not only serves as an aid, but adds ﬂexibility and enhanced features (such as a Web based customer self-service platform) that create an end user experience not found on single provider networks. Design Nine recommends implementing the COS Infrastructure Management and Provisioning Engine allows end users to choose the services they want to subscribe to through a 24x7 portal which is available as soon as their device is installed. COS is pre-integrated with the Calix CMS system. MONITORING Basic network monitoring software such as Nagios, What’s Up, and ZenOSS send requests for information (pings, or SNMP requests) to devices on the network, and record the information that is sent back. Monitoring systems should present a variety of alerts and reports to assist Network engineers to understand the status of the network. As an example, if a device or link fails the monitoring server will quickly recognize the failure and can be programmed to automatically send alerts to network engineers and other supporting entities. Based on the nature of the problem the software can also identify the cause of an outage through a process called root cause analysis and can escalate reports depending on the severity of the problems. !!!!!!!!!!!Page 127 of 130 Design Nine recommends Groundworks OSS for Monitoring and Traffic collection. Groundworks is an integrated suite of Open Source applications incorporating tools like Nagios and Cacti. The beneﬁt of Groundworks over multiple Open Source component solutions is that the Groundworks engine conﬁgures the underlying applications and tools and provides an integrated view of the network. ENHANCED MONITORING CAPABILITIESAdditional monitoring features are available in more sophisticated network monitoring softwares that allow network owners to see very detailed information on the status of their network. In addition to network uptime many devices on a network can report on the status of their individual components, environmental conditions that the devices happen to be experiencing, and a devices observation of the networks performance from it’s point of view (bandwidth, etc.). Very complex monitoring systems are available which can deliver highly customized reports which can allow network engineers to proactively take actions to protect the network from outages and bottlenecks. As an example, Calix COMPASS can utilize NetFlow data from the Juniper MPLS routers to develop complex reports of type of service, utilization of data (e.g. bandwidth) and/or time of day and alert network engineers of a pending capacity problem, allowing proactive maintenance to prevent degradation of service. TROUBLE TICKETINGTrouble Ticketing softwares allow the network owners to keep track of customer problems, resolutions to common problems, and other types of data. When a problem is reported at the network operations center (NOC) an employee will create a ticket to track the issue. Integration with monitoring alerts can allow tickets to be automatically created based upon outage not only allowing troubles to be tracked and every action timestamped in the ticketing system, but if integrated with billing allows proactive service credits to be applied to bills for outages incurred during the month. Trouble Tickets ﬂow through the system and include every interaction and can auto-escalate based upon proﬁles of troubles. An example of a typical trouble ticket starts initiates with a trouble call from a Service Provider (A Bozeman ﬁber initiative would not have a relationship with an end user). A ticket is opened and if the employee ﬁrst responding to the complaint is not able to solve the problem the ticket will be forwarded/escalated to the right department or staff member. In an open network the network owner responds to tickets and issues from the service provider, not the end user. Common issues and requests from service providers will include requests for historical performance information (i.e., what did a customer connection look like yesterday around 2pm), to resolve billing and account issues, and requests potentially orders for services (Order Management and Ticketing can often be the same platform). !!!!!!!!!!!Page 128 of 130 EXPANDING THE NETWORK AND LAST MILE PROJECTSWhen selecting a network architecture it is essential to consider future projects and expansion. The network architecture selected allows for easily repeatable deployments with minimal expenses for additional equipment. Line cards and optics from Juniper to migrate to a 100GB in the dual core routers are available today and 40GB line cards and optics for the distribution routers will be available in 2013. The Access/Edge network can be in service upgraded by reducing the number of E7-20s in a 10GB ring or upgrading rings to 100GB Ethernet. !!!!!!!!!!!Page 129 of 130 Bozeman Fiber Project Master Plan !!!!!!!!!!!Page 130 of 130 Bozeman Fiber Project Master Plan Overview JANUARY, 2015 Table of Contents ............................................................Overview of the Bozeman Fiber Concept 1 ....................................................................................................Market and Need 3 ........................................................................................................Business Model 5 ............................................................................................Goals and Objectives 6 .........................................................................................Critical Success Factors 7 .................................................................................................Financial Summary 8 ..............................................................................................Proposed Route Map 9 2 This feasibility study was made possible by the generous support of the following organizations. Bozeman Deaconess Health Services Bozeman Area Chamber of Commerce Northwestern Energy Bozeman Public Schools City of Bozeman Downtown TIF District North 7th Avenue TIF District Montana Department of Commerce, Big Sky Trust Fund U.S. Economic Development Administration, U.S. Department of Commerce Overview of the Bozeman Fiber Concept The Bozeman Fiber Master Plan and Feasibility Study recommends that the City of Bozeman partner with a private entity to manage and operate the proposed open-access network. That entity, referred to here as, Bozeman Fiber, will be operated as an independent organization structured as a community nonproﬁt or LLC. The formal legal structure of this organization will be forthcoming, pending advice from legal counsel. Structuring Bozeman Fiber as an independent community enterprise will provide Bozeman Fiber with two important beneﬁts: The enterprise will have the business and management ﬂexibility needed to make decisions efficiently and effectively in the fast-moving broadband business environment. As a community enterprise with ﬁnancing and equity from local stakeholders, the project is vested in the community and can be operated on behalf of the community priorities and economic development needs, but will not be limited by public sector restrictions on op- erations or decision-making. The network will be operated as a single high performance ﬁber network available to any and all service providers, including incumbent providers who want access to the signiﬁcant market opportunity represented by Bozeman. This shared business model is fundamentally different from the twentieth century copper-based networks where each provider has to build and operate a completely duplicated network (i.e. two providers each build a separate and duplicated network to reach the same customers, which results in higher costs across the board for customers). Network Operations Management Contracts Network Management and OperationsService Provider Management Routine/Emergency Maintenance Bozeman FiberLenders Independent private sector entity City of Bozeman Public Awareness/ Marketing Financial Management Some passive assets are owned by the City and leased on an open access basis Customers Other customers K12 Schools Businesses Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 1 of 9 In this model, the City of Bozeman may own at least some of the conduit/handhole assets and leases the assets to Bozeman Fiber. The lease arrangement will be structured for a minimum of twenty years, with a nominal annual lease fee and possibly a long term revenue share arrangement that would begin once Bozeman ﬁber begins to cover all operating expenses and debt service. Depending on the form of the business entity, the structure could also allow ownership participation by local businesses and investors (i.e. an LLC rather than a nonproﬁt). As part of the Bozeman Fiber operating agreement, excess revenue that exceeded expenses and debt payments could be disbursed on a scheduled basis to any local businesses that made an investment in the project. Bozeman Fiber will have a limited number of essential roles: Contract Management - Bozeman Fiber will hold contracts for outsourced network opera- tions, outsourced network repairs and maintenance, outsourced construction of network extensions, and service provider contracts for the services offered on the network. Where it is efficient and effective, Bozeman Fiber would seek to use qualiﬁed private sector ﬁrms to handle the technical operations of the network to minimize the number of staff re- quired by Bozeman Fiber. Financial Management - Bozeman Fiber will provide the ﬁnancial management and ad- ministration of the business. Most routine bookkeeping and accounting would not require full time staff and could be handled by part time staff and/or outsourced to a local ac- counting ﬁrm. Public Awareness - Bozeman Fiber will maintain a modest, ongoing public awareness campaign to ensure that local businesses are aware of the opportunity to obtain higher performance, ﬁber-delivered services at attractive (lower) rates. While service providers would be responsible for their own sales, billing and customer management, Bozeman Fi- ber would focus on name and brand awareness in the community. Bozeman Fiber, as a private sector entity, keeps the local government out of the business of broadband while preserving the opportunity to seek grants and other funding via nonproﬁt channels and/or leasing conduit from the City. Local businesses that choose to make an investment in Bozeman Fiber could look forward to recouping their initial investment over a period of several years, and in subsequent years could see a modest return on that investment. Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 2 of 9 Market and Need There is much confusion about the “true” deﬁnition of broadband. From the perspective of economic development, there can be no upper limit on the deﬁnition of broadband. Saying that broadband (as an example) is 5 megabits/second of bandwidth or 10 megabits/second is to immediately tell businesses in the region that there will be structural limits on their ability to do business in the future–it is dictating the size of truck that can be used to deliver goods and services. Here is the only appropriate deﬁnition of broadband: Broadband is whatever amount of bandwidth is needed to support a business’ ability to compete in the global economy. Broadband is a community and economic development issue, not a technology issue. The essential question is not, “What system should we buy?” or “Is wireless better or cheaper than ﬁber?” Instead, the question for Bozeman is: “What do our businesses and residents need to be able to compete globally over the next thirty years?” In short, Bozeman today has “little broadband” in the form of DSL and cable modem service, along with a very limited amount of “big broadband” in the form of ﬁber to a few businesses and institutions. If Bozeman is to make investments in broadband and telecommunications infrastructure, it is absolutely critical that those investments are able to scale gracefully to meet business and economic development needs for decades. This drives the solution towards a high performance ﬁber network designed with a redundant multiple ring architecture that will meet the needs of the most demanding users of the network. Two key concepts that should drive community investments in telecom are: “Broadband” is not the Internet and bandwidth is not a fixed number Broadband and “the Internet” are often used interchangeably, but this has led to much confusion. Broadband refers to a delivery system, while “the Internet” is just one of many services that can be carried on a broadband network. The challenge for Bozeman is to ensure that businesses and homes have a broadband network with sufficient bandwidth to deliver all the services that will be needed and expected within the next three to four years, including but not limited to “the Internet.” Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 3 of 9 Next 2-4 years Next decade Twenty years Small business needs (1-9 em- ployees) 10-25 megabits of symmetric band- width and 5-10 megabits of Internet access 100 megabits of symmetric bandwidth and 20-40 megabits of Internet access Gigabit+ symmetric bandwidth and 50 to 100 megabits of Internet ac- cess Medium-sized business needs (10-100 employ- ees) 50-100 megabits of symmetric band- width and 10-20 megabits of Internet access Gigabit symmetric bandwidth and 50 to 100 megabits of Internet access Multiple gigabit symmet- ric circuits and lightpaths and 100+ megabits of Internet access Large business needs (100-1000+ employees) Gigabit+ symmetric bandwidth and 100+ megabits of Internet access Multiple gigabit symmetric connec- tions and 250 to 500 megabits of Internet access Multiple gigabit symmet- ric circuits and lightpaths and 1 Gigabit+ of Inter- net access Residential needs 25-50 megabits of symmetric band- width and 4-8 megabits of Internet access 100 megabits of symmetric bandwidth and 20-30 megabits of Internet access A Gigabit symmetric circuit and/or lightpaths, with 50 to 100 megabits of Internet access Bozeman faces a challenge in economic development infrastructure with primarily “little broadband” (i.e. DSL, wireless, and cable services) when many communities, regions, and countries have already made the decision to focus resources on the development of “big broadband,” which is typically ﬁber with a minimum capacity of 100 megabits or Gigabit to the premises. A third of IBM employees work from home at least part time, and the company has re- ported annual savings of $110 million. Australia’s government is converting the entire telecommunications infrastructure for the country to an open access system by buying a major portion of Telstra assets. Telstra, which is currently the country’s primary incumbent telecom provider, will become a serv- ice provider on the new open network. Fiber to the premises attracts home buyers, who are willing to pay $2000 to $4600 more for a house with ﬁber service. Fiber to the home users say they are able to work from home more often, averaging 7.3 workdays per month, reducing their carbon footprint and decreasing wear and tear (and maintenance) on roads. More than 14% of homes in the U.S. had been passed by ﬁber by mid 2013. Nationally, less than 10% of homes have no access to any kind of broadband service, but in the region, more than 16% of homes still have no broadband access, or 50% higher than the national average. Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 4 of 9 Business Model Bozeman Fiber will pursue a wholesale model, selling network transport (i.e. a shared digital road system) on a wholesale basis to retail service providers, who will market and sell to their own customers. Bozeman Fiber will be a shared infrastructure, multi-provider, multi-service network. Roads and airports are examples of common shared infrastructure used by by both public and private entities to meet a wide variety of community business and government needs. Service providers will be the customers of Bozeman Fiber. Some of the outcomes of this approach are: More customers -- When the network capacity is shared among several providers, each provider has a much lower cost of infra- structure needed to enter a market. In smaller towns and re- gions, this is a critical difference. Community investments allow more companies to proﬁtably offer services in smaller markets than a ﬁrm could do on its own. Lower costs -- When a provider can reach more cus- tomers via a shared broadband system, lower costs of service usually results. Typical reductions in cost in open access systems are usually on the order of 15%, and are frequently much more than that. It is not unusual to see the cost of telephone service decline by 40% or more. Services aggregation occurs when communities build open networks, meaning that any qualiﬁed service provider can offer services using the community digital roadway. In this business model, there are usually several service providers competing for customers in each category of services (e.g. voice telephone service, TV, Internet access). More choice-- A natural outcome of more services is more choice for purchasers of serv- ices. Instead of a single monopoly provider of telephone or television, customers can pick and choose among a variety of service plans at various price points. More competition -- When more services are available, there is more competition for cus- tomers. Subsequently, service providers must sell services for the lowest possible price, and also creates incentives to provide excellent service to customers. Compare this to a mo- nopoly environment where there is no competition and hence little pressure for a company to provide good service--customers have no other service options. More services -- When there is a wider choice of services on the shared system, there is more opportunity to use more services. This is, in part, what makes open service provider networks ﬁnancially sound investments for communities: Open systems create a bigger market for telecom services, and thereby creates more revenue ﬂowing through a commu- nity revenue sharing plan. Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 5 of 9 Goals and Objectives The Bozeman Fiber network will have the following characteristics: Standards-based - The network will be based on an active Ethernet architecture for the core network and for delivery of business class services to key anchor institutions and businesses. If in the future the network begins to deliver ﬁber to the home on a wide- spread basis, a PON (Passive Optical Network) architecture may also be deployed. Scalable - The initial design of the network will support a graceful expansion over time to be extended to all areas of the city. The long term goal of the project is to deliver high per- formance, affordable broadband services to any residence, business, or institution in the Bozeman area that requests service, with Gigabit ﬁber as the standard minimum connec- tion. Affordable - Bozeman Fiber will work with providers to ensure that a wide range of af- fordable services are available for businesses and families with limited resources. Symmetric Bandwidth - Upstream and downstream data capacity of the broadband net- work will be equal. Current broadband systems restrict upstream data capacity to a frac- tion of the downstream capacity, and thereby limits economic development, entrepreneu- rial activities, and work from home opportunities. Bozeman Fiber will help retain existing businesses and attract new ones, especially in Bozeman’s business districts. Business-class ready - Businesses in Bozeman should have as much bandwidth as they need to do in order to maintain and enhance services globally. The network will deliver any amount of bandwidth needed by any business connected to the network, with any desired quality of service (QoS) required to make Bozeman businesses competitive in the world economy. Redundancy and Resiliency – The network will be designed with a redundant “ring” archi- tecture to minimize downtime from accidental ﬁber cuts and network equipment failures. Bozeman businesses, local government, schools and anchor tenants will have a high reli- ability network. Equal access to all providers – The network will be operated on an open access, wholesale business model with all business and residential services provided by qualiﬁed private sec- tor providers. A single public wholesale price list will be used to determine the cost of provider use of the network. Equal access to all residents and businesses over time – The goal of Bozeman Fiber is to deliver high performance ﬁber services to all residents and businesses as rapidly as possible consistent with ﬁscally conservative operations. Competitive Marketplace – Bozeman Fiber will be operated as a multi-provider, multi- service network with a wide range of competitive price and service options available to customers. Limited Government Involvement - Bozeman Fiber will be owned and operated independ- ently of the City of Bozeman. It will function as a true public/private partnership with limited but important support from the City. Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 6 of 9 Critical Success Factors Public/Private Partnership - Develop and maintain a relationship with key public and private stakeholders, including the City of Bozeman for equal access to City-owned conduit and ﬁber, to ensure timely access to right of way, and swift approval of permits. Customer Focused - Build and maintain enduring relationships with key businesses and institutions in the community to ensure that Bozeman Fiber delivers a world class, affordable, resilient and redundant network to meet the needs of these customers. High Quality Service Providers - Establish letters of intent and ultimately contracts with a variety of qualiﬁed service providers who will use the network to reach existing and new customers with a wide range of competitively priced services. Operate as a start up business - Bozeman Fiber must be started and managed as an entrepreneurial start up in a competitive environment. Early staff hires will require a track record of successful business/administrative management and a demonstrable record of innovation. They should be ﬂexible, knowledgeable about local government, and be comfortable with technology. Fiscally Conservative Funding - Successful projects provide enough funding to support eighteen to twenty-four months of operations. There are a variety of ﬁxed costs (staffing, outside plant maintenance, network operations, utility costs, office costs, etc.) that accrue beginning on day one, when revenue is low. While some community projects have been successful getting into the black operationally in year one, it sometimes takes longer. Careful Financial Oversight - Broadband infrastructure projects require rigorous ﬁnancial oversight. Projects that have developed ﬁnancial problems have usually over-estimated early revenue, under- estimated expenses, and/or simply spent too much without aligning expenses with revenue. Use take rate targets as a key performance measure - Take rates directly affect revenue: if take rate projections are not being met, revenue shortfalls are likely. Take rates (both raw numbers and month to month growth rates) should be analyzed at least quarterly (monthly would be preferable). Plan for marketing and public awareness efforts - It will be necessary to have a robust and regular marketing and awareness campaign to ensure that area businesses know that the new Bozeman Fiber network is available, that they know what service providers are available on the network, and they know how to order service. While service providers will be responsible for sales (that is, selling their services and signing up their own customers), the network itself will have to market general awareness of the network. Plan to Grow - Most community-funded efforts start small. This appears to minimize ﬁnancial risk, but over time, the network may not pass enough potential customers to meet take rate projections. Even small networks have a certain amount of ﬁxed operational costs regardless of size, and the network needs enough revenue to pay those expenses, as well as make principal and interest payments on any loans. Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 7 of 9 Financial Feasibility Summary Delivering high performance broadband to a community is a capital-intensive business, with potentially attractive long-term rewards. Once customers have connected to a ﬁber broadband network, they seldom terminate service. It is important to note that the multi-provider, multi- service business model allows end user customers to switch from one provider to another while still creating revenue for the network. The initial three year development of Bozeman Fiber includes a business class fully redundant ring built around the city that will pass an estimated 500+ businesses, and over a ten year period the project expects to pass more than 95% of the businesses in the city. A combination of grants, equity and loans, for a total of less than ﬁve million, will construct both the core network ring and all the laterals needed to connect City facilities, many institutional customers, and hundreds of large and small businesses. Bozeman Fiber projects being in the black operationally in year three, and beginning in year six will generate enough revenue to ﬁnance additional expansion. Our ten year pro forma analysis projects that the proposed network is feasible and ﬁnancially sustainable. In our ﬁnancial analysis, operational expenses are have been divided into two categories: Salary, General, and Administrative (SG&A) projects expenses that are relatively independent of the size of the network, although this is only a rough rule of thumb. Costs like staff and marketing do tend to grow over time as the network expands. Network Operations costs identify expenses that are more tightly linked to the growth of the network. Anticipated SG&A costs include: Staff costs, including salary, beneﬁts, and staff-related expenses like travel, phone/Internet access, and miscellaneous overhead. General office expenses, including office supplies, computer supplies (e.g. ink, paper, toner), and shipping and postage. Marketing expenses, which are typically calculated based on the growth in customers. Other expenses, including legal counsel, consultants, insurance, and miscellaneous costs. Operating expenses include: Support Fees, which are related to the cost of extended warranties for equipment and allo- cations for space parts, as well as software license fees. Network Operations Costs, which include any OSS/BSS software per subscriber fees, the cost of contracted network operations, and other infrastructure-related expenses. Outside Plant Maintenance, which budgets maintenance costs for ﬁber and wireless assets (e.g. ﬁber cable, handholes, cabinets, wireless towers, etc.). Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 8 of 9 Proposed Route Map Proposed routes of the early stages of development. Bozeman Fiber Project Plan DRAFT- Do Not Distribute !! ! ! ! !Page 9 of 9 iConnect POP Zayo/AT&T POP MSU Data Center Phase ThreePhase Two Phase Three Phase One Phase Two Phase Three Phase Three Phase Three Future Fiber Phase Two 0 2,400 4,800 7,2001,200 Feet Fiber Segments Future Phase One Phase Two Phase Three Lateral Existing Network Zayo Long Haul Zayo Metro Fiber Locations CAI Business Customer Tax Increment DistrictsBozeman, MT - Map 18 - Network Design: Bozeman Fiber - Future