August 2019 Broadband Service - City Study

Presented at a City of Holland & Holland BPW joint study session August 14, 2019.

Presentation by Holland BPW.

Transcript

1. Study Session Broadband Service – City Study August, 2019
2. Downtown Update • 79/158 Buildings “Lit” – 50% • 96/426 Customers – 22% take rate • Total capital cost: $811,563 • Per passing (426) - $1,593 • Per drop - $2,658 Projection Actual Internet 76% 67% Enhanced 10% 27% Tenant 14% 6%
3. Downtown Pro Forma FY 2019 FY 2020 FY 2021 Revenue 135,720 145,920 156,120 Operating Expenses 34,205 40,205 40,205 Depreciation 44,736 46,761 48,785 Net Income 56,779 58,954 67,130 Number of Customers 96 106 116 10 Year IRR – 4.4%
4. Cumulative Cost/Revenue Curve $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Revenue Cost
5. Market Conditions Unfavorable - • States are being lobbied by telecommunications companies, and are considering anti- public broadband bills • Federal activity is similar, with current FCC activity being very pro-corporation • Existing carriers investing aggressively in infrastructure upgrades nationally, including Holland Favorable - • There has been explosive growth of public broadband projects (municipal, co-op, and other) across the nation. • Pro-broadband development laws and funding activity (MN funding, CA network neutrality) • Customer satisfaction with incumbent carriers low • The success of our downtown project shows demand • FCC definition: 25M Down and 3M up. Shared Gig: 1000M (1G) Up and down.
6. Summer 2019 Interest
7. Cost Analysis - Study Area • 110 Properties • 143 Potential customers (passings) • Evaluated Overhead vs. Underground options • Included Electric Transmission & Distribution operations
8. Cost Analysis - Overhead • Footage: 4,121 Mainline, 10,371 Drop • Mainline Cost per passing: $963 • Cost per Drop: $1,402 • Total Cost $260,125 – Complete build-out
9. Cost Recovery Options • Demand Aggregation • Group of customers in project footprint that sign up for service pay for all the infrastructure and electronics in the area • $85 per month for services provided – take rate will need to be 23% of 143 • 10 Year IRR = 4.3% (Similar to downtown) • Special Assessment • All 110 property owners pay for fiber infrastructure • $7 per month for 20 years (Mainline) • Service for $68 (O&M + 4 year recovery on drop) • $13 per month for 20 years (Mainline & Drop) • Service for $41 • Wholesale Price - $27 • 20 Year Millage • Passing infrastructure - .77 mills • Passing and Drop infrastructure – 1.9 mills
10. Special Assessment Cost Breakdown • Assessment Includes: • Neighborhood Deep Fiber – Passing • Fiber to the Home – Drop • Distribution Electronics • Monthly Rate Includes: • Home router (ONT) • ($10/mo cost from other providers) • Operations & Maintenance • Upstream bandwidth • Customer Service • Marketing • Labor • Administration • Support contracts Bottom Line: $54/month for 1 synchronous shared gigabit service
11. Current Expressions of Interest - potential next project footprint • 13 Expressions of interest in project zone (11.8%)
12. Value of Community-developed Broadband • World-Class Infrastructure • Future-proof Fiber • Next-Generation bandwidth • Open Access / Competition • Customer Choice • Lower prices • Higher quality • Local control • Public Utility • Public Accountability • Local Service and Support • Non-profit sustainable business model • Institutional networks • Property Value • 3% or more • Economic Impact • Business Attraction • Job Creation • Tech and Entrepreneurship • Smart Cities • Social Impact • Digital Inclusion • Education • Medicine
13. Recommendations • Create City Broadband Task Force • Engage with stakeholders (Business, Residential, Education, Public Services) • Build consensus for further broadband development • Conduct market research for residential demand/interest throughout the city (block by block) • Develop guidelines for funding via assessments • Continue to develop service in areas that meet the 4 year revenue test cost recovery model. • Focus on business districts • Build in high-demand areas • Real estate value demonstration