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5c Fraser and Winter Park Broadband Report
2211 N Minnesota St. Mitchell, SD 57301 | 605-995-1777 | www.vantagepnt.com E n g i n e e r i n g O u t s i d e P l a n t C o n s u l t i n g MARCH 6, 2017 Town of Fraser Town of Winter Park Broadband Feasibility Report EXECUTIVE REPORT Report Contact: Lori Sherwood Director of Broadband Development 1515 Stoneham St. Superior, CO 80027 605-995-1831 303-882-1566 Lori.sherwood@vantagepnt.com 1 EXECUTIVE REPORT Table of Contents BACKGROUND ............................................................................................................................................... 2 1. Case for Broadband........................................................................................................................... 3 1.1 Overview of Current State of Broadband in Fraser and Winter Park ....................................... 4 1.2 Residential Survey ..................................................................................................................... 6 1.3 Residential Survey Key Findings ................................................................................................ 6 1.4 Business Survey Key Finding ..................................................................................................... 9 2. Municipal Network Models............................................................................................................. 10 2.1 Network Types ........................................................................................................................ 10 2.2 Ownership and Operating Structures ..................................................................................... 11 3. Fraser Valley Infrastructure Assessment and Network Options ..................................................... 12 3.1 Existing Infrastructure ............................................................................................................. 12 3.2 Network Options ..................................................................................................................... 13 4. Gap and Cost Analysis ..................................................................................................................... 20 4.1 Self-funding ............................................................................................................................. 21 4.2 Federal Funding....................................................................................................................... 21 4.3 State of Colorado .................................................................................................................... 22 5. Options and Recommendations ..................................................................................................... 22 5.1 Option 1: Develop a FTTP Network with a Provider-Partner .................................................. 23 5.2 Option 2 - Deploy a Middle-Mile Network.............................................................................. 24 5.3 Option 3 – Encourage Investment .......................................................................................... 25 5.4 Final Recommendations .......................................................................................................... 26 APPENDIX A – GLOSSARY ............................................................................................................................ 27 2 EXECUTIVE REPORT BACKGROUND Vantage Point Solutions was awarded a competitively bid contract to conduct a Broadband Feasibility Study (Study) for the Town of Fraser (Fraser) and the Town of Winter Park, (Winter Park) Colorado. The two towns are located at elevations of approximately 9,000 ft. and are situated within five miles of each other in Grand County, Colorado. From Denver, the Fraser Valley sits about 90 minutes northwest of Denver and is accessed via Highway 40 over Berthoud Pass, which reaches an elevation of 11,315 ft. The valley is surrounded by the Arapaho National Forest. The collective population of Fraser and Winter Park is approximately just under 150 0. The Town of Winter Park spans 7.5 square miles, and includes the village of Winter Park Resort. The Town of Fraser spans approximately six square miles. There are a total of six incorporated towns in rural Grand Coun ty with a population just over 12,000. Tourism is the prime economic driver in this region. There are also a significant number of home-owners that reside elsewhere the majority of the time. Similar to most rural mountainous regions in Colorado, curren t broadband connectivity in the Fraser Valley is not sufficient. Broadband is not available, lacking in terms of speed and reliability or cost-prohibitive . The purpose of this Study was to investigate options for bringing better broadband to the Fraser Valley. The study primarily included the following 5 elements: Conducting community o utreach to potential stakeholders; Conducting a residential and business study; Examination of Network Models; Conducting an a ssessment of existing a ssets; Identification of a high-level potential network design ; Provide a funding gap and cost a nalysis; Provide options and recommendations for moving forward. This Report provides a detailed overview of the data gathered and provides recommendations and a roadmap forward for Fraser and Winter Park for how the towns can best achieve the goal of bringing ubiquitous broadband to the region. 3 EXECUTIVE REPORT 1. Case for Broadband Over the last few years, municipalities across the country have been engaged in the process of actively seeking solutions to help bring high-speed broadband to unserved and underserved neighborhoods and communities within their jurisdictions. Today broadband is not a luxury, but rather a necessity. Residents, businesses, tourists and others need broadband in order to (among other things): Apply for jobs; Access web-based government services; Work from home or a secondary location; Access educational services, conduct research; Conduct business and support business services directly tied to revenue; Stay connected to family; Access the internet and watch web-based programming. For a local government – and over time, the cost of funding a broadband solution can be significantly less than the cost of not having robust broadband. This is particularly true in Colorado where communities across the State are actively trying to bring better broadband to their jurisdictions to fill in the gaps where service is non -existent or insufficient. Data provided by the Colorado Department of Local Affairs shows why this is so important. Between the years of 2010 – 2014, Grand County has seen a slight population gain between but has sustained a 5 - 10% job loss relative to the Pre-Recession Peak. 4 EXECUTIVE REPORT As you can see from these two charts, some of the counties that border Grand County are similarly positioned and others continue to see population and job growth. Grand County must determine ways to sustain population growth while competing with neighboring communities for jobs and tourist dollars. Is broadband a way to do that? The counties that border Grand County are all looking at ways to improve broadband. Routt County is building a middle-mile network to serve anchor institutions and encourage last -mile providers to build out additional infrastructure serving homes and businesses. Summit County is in the process of evaluating proposals from providers to build a last-mile solution in the county. Gilpin and Clear Creek Counties are conducting broadband studies. The City of Boulder is also evaluating proposals from providers regarding the possibility of moving forward with a fiber -to- the-home solution. This is just to name a few – many Colorado communities are also exploring broadband solutions. The purpose of this Study is to examine the feasibility of bringing a broadband solution to the Fraser Valley. The first step is to examine the current landscape. 1.1 Overview of Current State of Broadband in Fraser and Winter Park As an initial first step in this Study, along with representatives from Fraser and Winter Park, VPS conducted community outreach. The purpose for this is to set the stage for understanding the microcosm that is the Fraser Valley. Community outreach is critical to hearing directly from key 5 EXECUTIVE REPORT groups regarding their personal experience with broadband in the community. This outreach is a pre-cursor to conducting the residential and businesses surveys. As part of the community outreach process, we spoke to the following groups: Fraser Economic Development Committee; IT Department; School System; Library; Winter Park Resort; Chamber; Real Estate Developers; Business Owners. These discussions focused mainly on obtaining feedback regarding what the perceived issues were with respect to broadband in the Fraser Valley and what the towns should do to resolve the problems. The following represents a summary of those discussions . Some of these points were repeated by multiple groups. Comments received include the following: There are bigger broadband problems with the unincorporated areas versus within the town boundaries; We need to encourage telecommuters and try to keep the 2nd home owners here longer; Biggest issue is getting what they expect to get in the big city; We cannot get good pricing (commercial and residential); Need more bandwidth; Sometimes the house or business next door doesn’t have same service; Need more Wi-Fi access points; Critical services on current cables do not have diverse pathway (at risk of losi ng service if cut); Better and faster internet is needed; Some businesses have sufficient service while others do not; Costs are a barrier to changing providers; Some businesses paid big money to bring fiber to their location; Need to take into account growth as well as solving problems of now. Some of these comments represent trends identified in the results of the market studies discussed next. 6 EXECUTIVE REPORT 1.2 Residential Survey Seeking feedback on the “current state” of broadband service and citizen satisfaction wit h current service, VPS reached out to residents of Fraser, Winter Park, and the surrounding areas. Fraser and Winter Park published links to the survey on their websites, sent information via email to email lists and both towns mailed survey notification a nd instructions in utility bills. Additionally, the Chamber and a few groups also emailed the links to their lists. What follows are key findings from the answers we received from 171 households and 28 businesses. It is important to note that the data received from these surveys is more directional research – meaning these insights are not a scientific market research exercise, but do in fact provide valuable feedback. 1.3 Residential Survey Key Findings There are several key findings to highlight from the residential survey. 1.3.1 Television Generally television is considered a must-have service that helps to attract and keep more subscribers – which is critical for new providers trying to make a profit. This is especially true in rural communities. In Fraser and Winter Park, almost 60% of respondents currently receive their television from cable. The remainder receive television through either the internet (35.1%) or satellite (31.6%). Over 8% do not watch television. When asked how much they were paying for television, many were unsure. Of those that knew the cost - 34.5% paying more than $100/month. However over $100/month suggests that those that do watch – have premium packages. Key Finding: Data suggests that television being a part of an internet package is not as important to Fraser and Winter Park residents that it is in other communities. However, it may be advantageous for a new provider to partner with Direct TV in order to offer premium television services along with an internet package to provide comprehensive services and increase take-rates. 1.3.2 Internet Speeds The Federal Communications Commission (FCC) currently defines broadband as speeds that reach a minimum of 25mbps downstream and 3mbps upstream (25/3). Other FCC programs for high cost rural areas through the Connect America Fund, require minimum speed of 10mbps downstream and 1mbps upstream (10/1). 7 EXECUTIVE REPORT As previously, stated – high speed internet is seen as the most important service when compared to cell service, television and fixed land-line telephone. To gauge the current level of internet- service, we asked we asked respondents to take a speed test and submit results. Of those surveyed, 77 submitted speed test results. Of those: 23 recorded speeds greater than 25/3 41 recorded speeds greater than 10/1 36 recorded speeds of less than 10/1 Aside from the speed-test, 31% of respondents indicated that they perceive their speed to be “good”. However, more respondents indicated that they viewed their speed as “fair” or poor” compared to “excellent” or “very good”. In one final question – we asked about respondent’s satisfaction with the speed of their internet connection. The results show that more than a third are dissatisfied while more than half are indeed satisfied with current speeds. Key Finding: More than half of respondents that submitted data, have internet speeds greater than 10/1. However, speeds ranged greatly from 0/0 to 237/12. Overall, speed tests, perception and satisfaction show mixed results. 1.3.3 Cost of Services Of those that do not buy home internet services - over 56% said that the single biggest reason is cost. As a result, we researched packages available from current providers in the Fraser Valley, The below table shows the range of services and packages. As you can see, the lowest level of internet service is priced at $39/month. Companies 1.5 Mbps 2.5 Mbps 5 Mbps 8 Mbps 10 Mbps 15 Mbps 25 Mbps 40 Mbps 100 Mbps 200 Mbps 250 Mbps 1,000 Mpbs 2,000 Mbps CenturyLink ----$34.95/mo -$44.95/mo -$69.95/mo --$109.95/mo - Comcast (Xfinity)----$29.99/mo -$39.99/mo -$49.99/mo $59.99/mo $79.99/mo -$2999.95/mo Grand County -$40/mo $55/mo $80/mo --------- Mountain Broadband $39/mo -$49/mo -$59/mo $69/mo ------- SlopeSide Internet ------------- *Unable to obtain pricing for SlopeSide Internet Companies 1.5 Mbps 2.5 Mbps 5 Mbps 8 Mbps 10 Mbps 15 Mbps 25 Mbps 40 Mbps 100 Mbps 200 Mbps 250 Mbps 1,000 Mpbs 2,000 Mbps CenturyLink ----$64.94/mo --$69.94/mo ----- Comcast (Xfinity)------$69.99/mo -$89.99/mo $99.99/mo --- Companies 1.5 Mbps 2.5 Mbps 5 Mbps 8 Mbps 10 Mbps 15 Mbps 25 Mbps 40 Mbps 100 Mbps 200 Mbps 250 Mbps 1,000 Mpbs 2,000 Mbps CenturyLink ----$101.89/mo --$104.94/mo ----- Comcast (Xfinity)------$89.99/mo -$109.99/mo $119.99/mo --- Companies 1.5 Mbps 2.5 Mbps 5 Mbps 8 Mbps 10 Mbps 15 Mbps 25 Mbps 40 Mbps 100 Mbps 200 Mbps 250 Mbps 1,000 Mpbs 2,000 Mbps CenturyLink ----$34.95/mo -$44.95/mo -$69.95/mo --$109.95/mo - Comcast (Xfinity)------$49.99/mo ------ TV & Internet Bundle Internet Internet and Phone Bundle Triple Play Bundles (TV, Internet, and Phone Service) 8 EXECUTIVE REPORT In addition, below is a sampling of comments submitted by survey respondents with respect to cost: Comcast internet is good but very expensive (and there really isn't any other viable option at the moment so they can pretty much charge what they want). High speed internet in this day and age is almost a necessity but it is a big drain financially; We are part time residents & can’t get affordable internet but want it; I'm interested in better internet service (i.e. better than 10 Mbps download) if it costs me less than $40/month. Otherwise, I'm satisfied with whatever I have now. Or perhaps I'll agree to $50-$60 more for 1 gig internet if it helps the underserved portion of my community; Beggars can't be choosers, I'll take what I can get. I would love to see municipal broadband and would be very happy to pay my share to get a system like that running; It would be awesome to have a single cable come into the home to provide TV, internet and phone services at a reasonable price. $100/month would be acceptable. Overall, cost is a big concern for respondents with 62% responding that they were dissatisfied with the current pricing of services. Regarding willingness to pay for a new robust service, responses showed that pricing over $60/ month would be a risky endeavor. As previously noted respondents do not appear willing to pay more than $100 for an installation or hookup fee. Key Finding: New providers would need to price services very aggressively in order to attract customers. 1.3.4 Meeting Citizen Needs As previously stated, while opinions vary, more respondents than not think that town government has a role in improving internet service. Some citizen comments submitted include the following: My answer on a publicly funded network - Not sure actually. If Google (for example) came in - do they require the town to fund? Did they require Austin to fund to bring their high speed into Austin? If the answer is yes, then my answer to the question on a publicly funded internet would change. But generally, I think the internet provider should fund the project with the town's encouragement; The idea of a publicly financed Wi-Fi in downtown Winter Park is very appealing, but I can't imagine the costs to incorporate the entire Fraser Valley and the amount of infrastructure that would potentially be required. Additionally, tourists/renters would more than likely be the ones that benefited the most from owners/tax payer dollars who already purchase private home internet services; 9 EXECUTIVE REPORT I may be interested in a public/private partnership. Town provides right of use at no charge to company but they have to pay to install cable/fiber . I am NOT in favor of any tax dollars being used to fund this initiative; The current broadband situation is a significant problem. I urge the Town of Fraser to address the issue if possible; We have a home in Fraser that we use mainly on weekends. Our primary residence is in Longmont, CO. Longmont recently started providing 1G internet . It has been hugely successful. Service is very fast and reasonably priced. If Fraser were able to do something similar that would be amazing. In addition, the following comments were submitted regarding need for a broadband solution: Need to invest in infrastructure. Many homes are 10+ years behind in internet accessibility; When I was taking an online class, I was unable to upload many of my assignments from home. I had to go to work (Winter Park Resort) to submit them. At the time I had internet access there but I no longer work in a position where I have access; My neighbors below me have two kids at Fraser Valley Elementary. They cannot get any Internet other than dial up at their house. They have to take the kids to t he library to do their homework; We also have a rental property up here and even in this climate of a critical housing shortage, we have had people decide not to rent from us because of the poor internet." Overall, this translates into the following key finding: Key Finding: Respondents surveyed are open to the town taking a role in helping bring better broadband to the Valley, but they are not entirely sure what the solution should look like. 1.4 Business Survey Key Finding Business respondents indicated the following regarding their service: Internet is very important to their business (74%); Current internet service is too slow and interrupts (80%); Only 11% do not have an internet connection at their business location; More business have cable internet connections (61%) than wireless (27%); Businesses are paying a range of $40/ month to $1200/month for internet. Overall, slightly less than 3 in 4 said they would pay at least $100/month for robust “extremely fast service”. The same number would pay at least $100 for an installation fee. From the information provided, we have one key finding: 10 EXECUTIVE REPORT Key Finding: Businesses surveyed show a desire for better broadband and would be willing to pay more to have it. 2. Municipal Network Models 2.1 Network Types There are two main types of municipal networks that serve end-users (other than networks built exclusively for internal government use) and they are middle –mile and last-mile. 2.1.1 Middle-Mile A middle-mile network is typically defined as a network that serves community anchor institutions (i.e. schools, libraries, government buildings, public safety agencies, hospitals, etc.) but does not directly serve homes and businesses. A middle-mile network could either be operated directly by the municipality or outsourced to a network operator. The purpose of middle-mile networks is generally to build a high fiber count (fiber cables with strand counts of 144 and above) backbone1 that provides direct lateral connections to key institutions and enables infrastructure assets to be leveraged by others to service homes and businesses. Third-parties may have an interest in leasing these assets because it helps with reducing their costs of deployment. A provider, then, would only need to invest in the lateral connections to homes and businesses and would not have to build the backbone. Middle-mile networks cost less to deploy because they are only designed to reach anchor institutions. Middle-mile networks usually also bring in revenue from leasing of conduit and fiber. 2.1.2 Last-Mile A last-mile network (also known as FTTP) is one that provides services directly to homes and businesses in the community. Last-mile networks can also serve anchor institutions. It is more unusual, however for last-mile networks to also lease assets. Last-mile networks are the most expensive to deploy but provide the biggest benefit to the community. In addition, municipal last-mile networks generally need an operator to partner with the municipality. Most of the municipal last-mile networks in existence are in communities with a municipal electric utility. This is because the utility already has pole infrastructure in place to offset costs as well as billing systems in place to serve customers. The best example in Colorado is the City of Longmont that deployed a fiber to the home network through its municipal electric utility. The Cities of Loveland and Fort Collins are also considering this solution through their municipal electric utility. 1 A backbone is literally the spine of the network. Backbone’s are usually built along main corridors and provide transport to and from the hub site where the electronics are located to the connected entity. 11 EXECUTIVE REPORT Last-mile networks usually require a take-rate that is between 40-60%. This means that the provider needs to obtain 40-60% of the residential and business accounts in order to recoup a capital investment, make a profit and be sustainable. 2.1.3 Open Access An open access network is one where the infrastructure assets (conduit and fiber) are made available under certain policies and procedures to multiple non-network owners. Usually this occurs in the form of dark fiber leases as described above. Publicly funded grant programs offered by the federal and state government often require networks to be open access. 2.2 Ownership and Operating Structures There are multiple kinds of ownership and operating structures. The below chart details four basic types: Type of Operating Structure Description Internally Managed This is a municipal network that is 100% owned and internally managed and operated. There are very few of these around the Country. This can be middle-mile or last-mile. Oversight of Outsourced Management In this structure, the municipality owns the assets, and provides oversight, but outsources the management and operations to a third-party entity that could be a private provider or a nonprofit. This can be middle-mile or last-mile. Third-Party Owned and Operated This is a network entirely owned and operated by a third-party but one where the municipality provides some resources (not financial) and resources and benefits from the service. This is usually a last-mile structure and one where the municipality has little control. Hybrid Another option is to create a hybrid model that combines one or more of the above options. An example of a hybrid option is a public-private partnership 2.2.1 Hybrid Structure - Public-Private Partnerships Public-private partnerships (PPPs) are a relatively new phenomenon in broadband. A PPP is a legal partnership wherein the partners balance and apportion risk, benefit and control. Recently, more and more municipalities are exploring establishing a PPP for deploying and operating last- mile networks. 12 EXECUTIVE REPORT Despite the fact that PPPs are widely pursued as options for last-mile municipal broadband networks, a PPP is difficult to establish. This is particularly true in rural areas where the cost of the build is high and the number of potential customers makes it difficult to justify the investment. 3. Fraser Valley Infrastructure Assessment and Network Options The next piece of analysis needed in order to make a network model determination is to ascertain what a Fraser and Winter park network could look like and identify high-level capital costs. Below is an analysis of existing infrastructure as well as four different network design options. 3.1 Existing Infrastructure The first step to developing a high-level network design is to evaluate existing infrastructure in the region to determine if any existing assets can and should be leveraged in order to save costs in network construction. VPS reviewed the following publicly available information for this task: Data and information provided by the State of Colorado, Northwest Colorado Council of Governments (NWCCOG), the Towns of Fraser and Winter Park and Mountain Parks Electric (MPEI); Data and information obtained by searching for registered towers; Data and information obtained through internet searches. The State of Colorado collects some information regarding broadband coverage. However, the State says that they do not collect data on existing asset or fiber infrastructure. What they did provide was a map showing broadband coverage areas based on advertised speeds and community anchor institution data. According to this information, the entire Fraser/Winter Park area is covered with Broadband. However, location and mapping of carrier facilities is considered to be confidential and proprietary. It should also be noted here that NWCCOG is about to launch a project to establish a transport network in northwest Colorado. The project is still being d eveloped and they expect to start construction in 2017. Right now, however, we were told that there is not a plan for the transport network to be deployed along Highway 40. The bottom line is that aside from MPEI utility poles, there is limited existing infrastructure in the Fraser Valley to leverage. 13 EXECUTIVE REPORT 3.2 Network Options Below are three last-mile models and one middle-mile option for consideration. 3.2.1 FTTP Models (Last-Mile) VPS developed three models to provide a high-level capital cost estimates only2 for the design and construction of a Fiber-To-The-Premise (FTTP) network build. The three models are: 100% penetration to every premise (home, business, government entity); 60% penetration to selected premises; 30% penetration to selected premises. For each model, we provided estimates for a build that is 100% underground and one that is partially underground while also utilizing MPEI utility poles.3 The following chart summarizes the total estimated costs of the three FTTP options. 100% Penetration 60% Penetration 30% Penetration 100% Buried $10,686,000 $8,024,000 $6,341,000 Aerial/Buried $9,148,000 $6,944,000 $5,290,000 As you can see, there is a $5,396,000 difference between the network that reaches 30% of the premises in Fraser and Winter Park and the one that reaches all premises constructe d 100% underground. Actual market penetration would likely not approach the 100% mark. Although market penetration varies greatly from project to project, it is common to achieve between 30% to 60% penetration in areas where existing broadband speeds are l acking. The full details and assumptions for each option are provided on the following pages as well as a map of the network with 100% penetration. We have also provided a Key to reading the three models. 2 Note: VPS was not tasked to develop a full business plan around one or all of the models at this phase of the project. We do not recommend conducting a business plan until a network design and operating model are selected. This may or may not include the selection of a provider to manage the network. 3 VPS made the following basic assumptions for each model: RF or IP video expenses, switching costs, data network equipment , or transport to exchange fees are not included; Assumes serving all locations from an existing CO building; Estimates include engineering fees or taxes; Electronics & fiber management costs assume GPON (type of equipment); Does not include any costs for right-of-way acquisitions; Outside Plant (OSP) costs do not include any additional fees for construction in rocky soil conditions (this is TBD determined). 14 EXECUTIVE REPORT Key to Reading FTTP High Level Estimates CO Electronics Description CO Electronics This includes the electronics, spares, miscellaneous materials needed for network operations, installation, and Optical Network Terminals (ONTs) that are attached to each premise. Note that the costs of the electronics do not depend on whether the network is constructed on aerial or underground. The costs will stay the same. Spares Misc. Materials Installation (10%) ONTs ONT Installation OSP OSP stands for Outside Plant Cable This includes the cost of the fiber, conduit, miscellaneous materials needed for the construction of the network. Drops refers to the cost of fiber drops to each premise. These cost estimates also includes the cost of construction (labor) and engineering. Drops Fiber Management Housing Units (Approx.) Number of housing units included in the network design Single Family/Business (Approx.) Number of single family/business units included in the network design MDU (Approx.) Number of multi-dwelling units included in the network design Average Cost per Housing Unit Average cost per unit Mainline miles - Aerial - 52% This refers to miles of backbone built on utility poles Mainline miles - Buried -48% This refers to miles of backbone built underground Drops Miles - Aerial - 52% This refers to the number of miles of fiber constructed from the backbone to the premise on utility poles Drops Miles - Buried - 48% This refers to the number of miles of fiber constructed underground from the backbone to the premise CO Electronics Aerial & Buried 100% Buried CO Electronics $562,000 $562,000 Spares $23,000 $23,000 Misc. Materials $12,000 $12,000 Installation (10%)$67,000 $67,000 ONTs $1,654,000 $1,654,000 ONT Installation $919,000 $919,000 OSP Cable $3,488,000 $4,330,000 Drops $1,980,000 $2,676,000 Fiber Management $443,000 $443,000 Total $9,148,000 $10,686,000 Housing Units (Approx.) 4100 4100 Single Family/Business (Approx.) 2000 2000 MDU (Approx.) 230 230 Average Cost per Housing Unit $2,231 $2,606 Mainline miles - Aerial - 52% 22.2 0.0 Mainline miles - Buried -48% 20.5 42.7 Drops Miles - Aerial - 52% 39.5 0.0 Drops Miles - Buried - 48% 36.5 76.0 TOTAL MILES 118.7 118.7 Assumptions: - Does not include RF or IP video expenses, switching costs, data network equipment, or transport to exchange. - Installation estimated at 10% of equipment. - Assumes serving all locations from an existing CO building. - Assumes 100% penetration. - Estimates include engineering fees or taxes. - Electronics & fiber management costs assume GPON. - Does not include any costs for right-of-way acquisitions. - OSP costs do not include any costs for rocky soil conditions. - Drop costs assume approx. 2000 single family units and 230 MDU units (Derived from Grand County GIS Data) $500 per aerial drop and $1000 per buried drop. - OSP cable costs include $482,000 for the backbone along Hwy. 40. (Aerial/Buried) or $704,000 for the 100% buried version. NOTE: We make every attempt to have our estimates be within +/- 10% of the actual project cost, which is normally the case. However, it is still an estimate, there are many factors outside of our control that could result in the actual cost differing by more than 10%, such as material or labor charges, design changes since estimate, inflation, construction delays, etc. Please keep this in mind when budgeting for this project. These are estimates of the total project costs and do not consider any limitations due to the FCC's Capital Investment Allowance (CIA). Please contact Vantage Point if you would like assistance determining your CIA limits. FRASER/WINTER PARK PROPOSED FTTP HIGH LEVEL ESTIMATE - 100% PENETRATION CO Electronics Aerial & Buried 100% Buried CO Electronics $339,000 $339,000 Spares $23,000 $23,000 Misc. Materials $12,000 $12,000 Installation (10%)$42,000 $42,000 ONTs $992,000 $992,000 ONT Installation $552,000 $552,000 OSP Cable $3,488,000 $4,330,000 Drops $1,188,000 $1,606,000 Fiber Management $308,000 $308,000 Total $6,944,000 $8,204,000 Housing Units (60%) 2460 2460 Single Family/Business (60%) 1200 1200 MDU (60%) 138 138 Average Cost per Housing Unit $2,823 $3,335 Mainline miles - Aerial - 52% 22.2 0.0 Mainline miles - Buried -48% 20.5 42.7 Drops Miles - Aerial - 52% 23.7 0.0 Drops Miles - Buried - 48% 21.9 45.6 TOTAL MILES 88.3 88.3 Assumptions: - Does not include RF or IP video expenses, switching costs, data network equipment, or transport to exchange. - Installation estimated at 10% of equipment. - Assumes serving all locations from an existing CO building. - Assumes 60% penetration. - Estimates include engineering fees or taxes. - Electronics & fiber management costs assume GPON. - Does not include any costs for right-of-way acquisitions. - OSP costs do not include any costs for rocky soil conditions. - Drop costs assume approx. 2000 single family units and 230 MDU units (Derived from Grand County GIS Data) $500 per aerial drop and $1000 per buried drop. - OSP cable costs include $482,000 for the backbone along Hwy. 40. (Aerial/Buried) or $704,000 for the 100% buried version. NOTE: We make every attempt to have our estimates be within +/- 10% of the actual project cost, which is normally the case. However, it is still an estimate, there are many factors outside of our control that could result in the actual cost differing by more than 10%, such as material or labor charges, design changes since estimate, inflation, construction delays, etc. Please keep this in mind when budgeting for this project. These are estimates of the total project costs and do not consider any limitations due to the FCC's Capital Investment Allowance (CIA). Please contact Vantage Point if you would like assistance determining your CIA limits. FRASER/WINTER PARK PROPOSED FTTP HIGH LEVEL ESTIMATE - 60% PENETRATION CO Electronics Aerial & Buried 100% Buried CO Electronics $170,000 $170,000 Spares $23,000 $23,000 Misc. Materials $12,000 $12,000 Installation (10%)$23,000 $23,000 ONTs $496,000 $496,000 ONT Installation $276,000 $276,000 OSP Cable $3,488,000 $4,330,000 Drops $594,000 $803,000 Fiber Management $208,000 $208,000 Total $5,290,000 $6,341,000 Housing Units (30%) 1230 1230 Single Family/Business (30%) 600 600 MDU (30%) 69 69 Average Cost per Housing Unit $4,301 $5,155 Mainline miles - Aerial - 52% 22.2 0.0 Mainline miles - Buried -48% 20.5 42.7 Drops Miles - Aerial - 52% 11.9 0.0 Drops Miles - Buried - 48% 10.9 22.8 TOTAL MILES 65.5 65.5 Assumptions: - Does not include RF or IP video expenses, switching costs, data network equipment, or transport to exchange. - Installation estimated at 10% of equipment. - Assumes serving all locations from an existing CO building. - Assumes 30% penetration. - Estimates include engineering fees or taxes. - Electronics & fiber management costs assume GPON. - Does not include any costs for right-of-way acquisitions. - OSP costs do not include any costs for rocky soil conditions. - Drop costs assume approx. 2000 single family units and 230 MDU units (Derived from Grand County GIS Data) $500 per aerial drop and $1000 per buried drop. - OSP cable costs include $482,000 for the backbone along Hwy. 40. (Aerial/Buried) or $704,000 for the 100% buried version. NOTE: We make every attempt to have our estimates be within +/- 10% of the actual project cost, which is normally the case. However, it is still an estimate, there are many factors outside of our control that could result in the actual cost differing by more than 10%, such as material or labor charges, design changes since estimate, inflation, construction delays, etc. Please keep this in mind when budgeting for this project. These are estimates of the total project costs and do not consider any limitations due to the FCC's Capital Investment Allowance (CIA). Please contact Vantage Point if you would like assistance determining your CIA limits. FRASER/WINTER PARK PROPOSED FTTP HIGH LEVEL ESTIMATE - 30% PENETRATION Winter Park Fraser © OpenStreetMap (and) contributors, CC -BY-SA Legend Proposed Fiber Routes Fiber_Type Aerial Buried Out-of-Area Aerial Out-of-Area Buried City Limits Name Fraser Winter Park 0 0.55 1.1 1.65 2.20.275 Miles ± Fraser/Winter Park Proposed Fiber 19 EXECUTIVE REPORT 3.2.2 Backbone Only Model (Middle-Mile) VPS also looked at one other cost-option model that is a middle-mile backbone-only model. The benefit of this model is that it would deploy a high-count fiber optic cable along Highway 40 for third parties to access and leverage via an IRU. This will be discussed more in Section 6. In each of the three FTTP examples, a foot note has been provided as to the cost of constructing the backbone only along highway 40. This reflects the cost of building fiber mainline for 8.3 miles along highway 40 between the northern boundaries of the Fraser town limits south to the Winter Park ski resort. Two costs were provided. The first cost was a mixture of aerial and buried for an estimated cost of $482,000 and the second cost was 100% buried at an estimated cost $704,000. Both of these costs are for backbone only and do not include the cost of electronics, drops, or buildings for fiber termination. The exact location of the termination points, access points to the internet and operating costs would be determined in the business planning phase. Overall, however, t his backbone only model is significantly more cost-effective than the last-mile models. 3.2.3 Capital Costs vs. Operating Costs The prior data provided high-level capital costs for the construction of four different network options. This was developed to give the towns a sense of the cost of network design, engineering, electronics, materials and construction for each model. This also provides critical data necessary for making recommendations and decisions on how best to move forward. If and when a model is selected, the next phase would be to develop a full business plan to determine the following: • 5-10 Year Forecast • Forecasted financial schedule Deliverables • Projected Capital Expenditures • Projected Depreciation Schedule • Projected Personnel Expense • Projected Operating Expenses • Pricing for Service Offerings However, based on our experience in developing business plans for providers across the country we can provide examples of what we have seen in terms of operating costs on a per mile and per location basis. First we want to define operating costs before providing the ranges. Operating costs for a FTTP include the following items: Personnel Expenses – Network, Customer Service, Corporate; Operational Vehicles; 20 EXECUTIVE REPORT Electronics and Equipment Warranty and Support; Insurance; Electricity/Utilities; Transport/Bandwidth; Marketing/Billing; Legal/Consulting/Accounting; Depreciation; Maintenance. The range of operating costs based on Per Mile/Per Month are as follows: • $965.77 • $1,857.22 • $5,997.29 The range of operating costs based on Per Location/Per Month are as follows: • $93.71 • $99.05 • $156.31 Using the data from the high-level Fraser/Winter Park FTTP estimates developed, and applying the range of costs identified above – we provide the below range of operating costs to be viewed as an example only. Actual costs would be developed during the business planning phase. 100% Penetration 60% Penetration 30% Penetration Total Cost Per Month for Total Miles 118.7 miles $114,636 $220,452 $711,878 88.3 miles $85,277 $163,992 $529,560 65.5 miles $63,257 $121,647 $392,822 Total Cost Per Month for Total Units 4100 Units $384,211 $406,105 $640,871 2460 Units $230,526 $243,663 $384,522 1230 Units $115,263 $121,831 $192,261 4. Gap and Cost Analysis Once a network model and operating structure has been determined, it is recommended to complete a sound business plan that includes costs, revenue projections and a financing plan. While some high-level costs need to be estimated prior to completing a full business plan, it is recommended that the full plan is completed in coordination with any financial contributors or provider- partners. 21 EXECUTIVE REPORT A key component in developing that business plan is to identify all funding sources and ide ntifying funding gaps. 4.1 Self-funding Aside from allocating capital project funds as part of the budget process, b ond funding is something municipalities can consider to assist with funding network construction, and to support startup and maintenance costs. There are two main types of bonds utilized for capital projects – Revenue Bonds and General Obligation bonds. General Obligation bonds are typically the kind of bond utilized for this kind of funding. However, an option would be to pursue revenue bonds secured with sales tax or other revenues. 4.2 Federal Funding Federal funding opportunities change year to year. With a new Administration, it’s difficult to predict what new sources of funding may be available. However, we provide below information on several grant funding opportunities currently available on the federal level. 4.2.1 Connect America Fund The FCC created the Connect America Fund (CAF) to help expand access to voice and broadband services to areas where services are currently unavailable. In 2015, through a competitive auction, the FCC awarded carriers nearly $1.7 billion annually for six years to bring broadband to unserved parts of their local service territories. Century Link accepted funding for areas in Colorado under this program. Recently, the FCC announced there would be a second round called the CAF Phase II (CAF II) auction. Under CAF II, there are census blocks that will be up for auction in Colorado. Based on an analysis of the FCC preliminary list, in Grand County, CO there will be: 82 eligible census blocks representing 373 total locations $414,056 available in annual support While these census blocks are outside the incorporated towns of Fraser and Winter Park, this could be a significant source of funding for a potent ial last-mile provider partner in the region. 4.2.2 E-Rate E-Rate is a federal program that provides reimbursement funding for telecommunications services to schools and libraries based on free and reduced lunch program percentages within an applying jurisdiction. E-Rate funds are only available to qualifying service providers. This may be an option to pursue for a third-party network provider partner. 22 EXECUTIVE REPORT 4.2.3 Public Safety Communications Research (PSCR) PSCR is a federal program that anticipates awarding up to $30,000,000 in grants and cooperative agreements by May 2017. The purpose of the program is to rapidly accelerate research and development related to public safety broadband communications. While Fraser and Winter Park would not be in a position to apply for these funds alone, this could be another source of funding for a potential last-mile provider partner in the region as well as other government entities. 4.3 State of Colorado Over the last few years, the Colorado Department of Local Affairs (DOLA) has awarded broadband grant funding to local governments in Colorado. This has been the sole source of grant funds made available to local governments. Fraser received a DOLA grant to assist with the funding of this Study. As of the drafting of this report, however, any remaining broadband funds available through DOLA for grant award are frozen. It is unknown when and if more funding will be directly available. There is also a possibility that municipalities will have to compete for broadband funding with other non-broadband related projects. The bottom line is that this is not a reliable source of potential funding. 5. Options and Recommendations Based on the information in this comprehensive Report, this section provides options and recommendations for moving forward with bringing better broadband to Fraser and Winter Park. Below is a summary of five key observations: 1. Broadband is critical infrastructure for communities. Fraser and Winter Park do not currently have a ubiquitous broadband solution serving all residents and businesses equally. Based on survey responses, it appears that there are issues with connectivity, cost, and access. There is a wide range of opinions on the quality of current services. 2. Based on survey responses, the cost of paying for service is a significant concern for residents. Initial research indicates that a new provider would need to aggressively price services to attract customers and keep cost of broadband below $60. This may be difficult to achieve. 3. The capital cost alone of building an underground Fiber-to-the-Home network to 100% of the premises in the towns exceeds $10 million dollars. While the ca pital cost of building a middle-mile (backbone) network could be less than $500,000. 23 EXECUTIVE REPORT 4. MPEI is moving forward with plans to provide internet service in their service territory. MPEI has expressed that offering service in Fraser and Winter Park are critical components for their business model to work. MPEI has also expressed an interest in working with the towns. There are also questions regarding: o Timing of network deployment; o Whether MPEI intends to serve all homes/businesses; o Pricing of services; o Service offerings; o What a potential partnership could look like If MPEI moves forward on their own, it is highly unlikely that the towns could support two new providers – both competing for the same customers to help increase take rates. 5. Grant funding opportunities may be available if Fraser and Winter Park partner with a provider and/or other regional entity. However, direct grant funding from the State or other sources are unlikely to be available. 5.1 Option 1: Develop a FTTP Network with a Provider-Partner4 Section 4 detailed the capital costs for three FTTP models. As noted, there is an estimated $5,396,000 difference between a network that reaches 30% of the premises in Fraser and Winter Park and one that reaches all premises constructed 100% underground. At a minimum this would require a capital investment of over $5 million (not including the costs of operating the system). The question to be answered is whether the benefits would justify an investment of this size. 5.1.1 Benefits An FTTP Network could among other things: Bring gigabit speeds to the Fraser Valley; Increase economic development opportunities; Increase value in real estate value (particularly for those areas that are currently unserved by fiber); Deploy infrastructure that will serve the Valley for the next 30+ years (including WiFi); Enable the Fraser Valley to compete with neighboring communities. However, there are some significant challenges associated with deploying an FTTP Network. 4 Based on our recommendations and discussions with the towns, it is not a viable opt ion for the towns to deploy and self-operate a FTTP network. This option was not considered. 24 EXECUTIVE REPORT 5.1.2 Challenges Although market penetration varies greatly from project to project, it is common, but not guaranteed, to achieve between 30% to 60% penetration in areas where existing broadband speeds are lacking. Because it is premature (unknowns include pricing, timeline, etc…) to attempt to obtain commitments and sign-ups from residents wishing to purchase service, it is unclear where those possible penetration areas are located. However, by building to fewer than 100% of the premises, it could exclude potential customers. In addition: As evidenced by the survey responses, the take rates will depend significantly on the cost of services to residents, as well as other variables, and the 30% to 60% pen etration may not be achievable; This option carries the most financial risk; The operational costs are high; It may not be possible to find a provider-partner who is willing to invest; If a provider-partner is not willing to make a financial investment, the burden of financing the network would rest squarely on the towns; If a provider is willing to invest, the provider may ask for full or partial ownership rights thus potentially locking the towns into a long-term relationship with the provider; An open access network would be difficult to sustain with an FTTP model because additional providers would be competing for the same customers and would impact take rates. Thus, it would probably not be feasible for the towns to lease the network assets to anyone else. 5.2 Option 2 - Deploy a Middle-Mile Network The cost of building a fiber mainline for 8.3 miles along highway 40 between the northern boundaries of the Fraser town limits south to the Winter Park Resort is significantly less expense than any of the FTTP models. As detailed in Section 4, the cost estimates range from $482,000 to $704,000 depending on whether the fiber is constructed as a mix or aer ial and underground or all underground. As a reminder, these costs are for backbone only and do not include the cost of electronics, drops, or buildings for fiber termination. The middle-mile network model has been effectively deployed by numerous municipalities. 5.2.1 Benefits Similar to an FTTP network, a middle-mile Network could also: Bring gigabit speeds to the Fraser Valley; Increase economic development opportunities; 25 EXECUTIVE REPORT Increase value in real estate value (particularly for those areas that are currently unserved by fiber); Deploy infrastructure that will serve the Valley for the next 30+ years (including Wifi); Enable the Fraser Valley to compete with neighboring communities. In addition there are these added benefits: The investment cost is much smaller and the risk is much less significant; The towns would own the network and this would be a valuable long term asset; This would need to be an open access network to maximize the amount of users and the towns could lease excess capacity (fiber and/or conduit) to providers and others. The return on the capital investment could be realized much more quickly; This could significantly increase competition. 5.2.2 Challenges However, there are some challenges associated with deploying a middle-mile network including: It may be difficult to find an operator partner who is will to manage less than 10 miles of infrastructure; The towns would need at least one provider to lease a large portion of the fiber to offset a large portion of the costs. As previously noted, one p rovider leasing fiber at the rate of $156 per strands could net approximately $155,376 for a ten year lease term. This would not entirely pay for the investment; The fiber backbone may not be enough of an incentive to attract potential last-mile providers to lease the network and build out to unserved neighborhoods. 5.3 Option 3 – Encourage Investment This option carries the least amount of risk and the least likelihood of achieving the goals of bringing better broadband to the Fraser Valley. 5.3.1 Benefits The benefits of this option include: It requires no financial investment on the part of the towns other than possibly utilizing town resources to conduct meetings and engage in procurement activities; MPEI may invest in building a FTTP network on their own which could bring most of th e benefits and none of the risk; There may be others interested in investing. 26 EXECUTIVE REPORT 5.3.2 Challenges The challenges of this option include: Timing is dependent on the schedule of others; The towns may not find anyone willing to make an investment; Offering incentives for investment is not a strategy that has worked well for similarly unserved communities – otherwise the incumbents and others would have stepped in to provide service to those that are unserved by broadband. 5.4 Final Recommendations After reviewing the key observations noted in this section, and examining all the options – we provide the final following two recommendations: 1. Based on the totality of information discussed in this report, we recommend that the towns explore option 2 – to design and build a middle-mile backbone network. While still in development, the neighboring Northwest Colorado Broadband model is promising and there could be ways to work with them that would be cost-effective (i.e. utilize NCB for network operations of the Fraser and Winter Park network). A middle-mile network would enable the towns to more cost-effectively build and own valuable infrastructure assets that could increase competition, provide revenue, and serve the community for the next thirty years. A middle-mile network can be pursued independently or in conjunction with MPEI. Additionally, a middle-mile network can form a foundation for a FTTP network down the road. However, if a FTTP network build is the initial model selected, you must commit to that model 100% and right now, the information analyzed in this Study does not suggest that a FTTP model is the best one to pursue. 2. Meet with MPEI to gain greater understanding of what the network plans are and what a potential partnership could look like including whether MPEI would be intereste d in leasing a dark fiber backbone. This will also help determine whether MPEI will serve the needs of Fraser and Winter Park communities. 27 EXECUTIVE REPORT APPENDIX A – GLOSSARY Backbone: A high-fiber count fiber optic mainline that provides connectivity to the internet. Connections to buildings from the backbone are called lateral connections. Conduit: A means by which something is transmitted. The conduit houses the fiber. Dark Fiber: Refers to fiber optic cable that has been installed and is available to use but is not connected to any electronic devices and not transmitting any data. Also referred to as excess capacity. E-Rate: A federal program that provides reimbursement funding for telecommunications services to schools and libraries based on free and reduced lunch program percentages within an applying jurisdiction. Fiber-to-the-Premise (FTTP): A last-mile network that connects all buildings in a community. Gigabit Passive Optical Networks (GPON): This is equipment based at the premise that supports triple-play services, high-bandwidth, long reach, etc. Indefeasible Right of Use (IRU): Commonly used in the industry to provide long-term access to assets. Conduit and fiber deployed is leased through an agreement called an IRU. Last-Mile Network: Network that provides services directly to homes and businesses in the community. Middle-Mile Network: Typically defined as a network that serves community anchor institutions (i.e. Schools, libraries, government buildings, public safety agencies, hospitals, etc.) but does not directly serve homes and businesses. Open-Access Network: Network where the infrastructure assets (conduit and fiber) are made available under certain policies and procedures to multiple non -network owners. Outside Plant (OSP): Commonly used to refer to construction of fiber assets. Public Safety Communications Research (PSCR): A federal program that anticipates awarding up to $30,000,000 in grants and cooperative agreements by May 2017. Public-Private Partnerships (PPPs): A relatively new phenomenon in broadband where partners establish a legal partnership that balances and apportions risk, benefit and control of a last-mile network.