Demand Aggregation Workshop and How to Bring Broadband Home

Demand Aggregation Workshop and How to Bring Broadband

Home

• It’s the Harry and Mark Show!!

Alabama

Tennessee

Georgia

SouthCarolina

Kentucky

WestVirginia

OhioM

issi

ssip

pi

North Carolina

Virginia

Pennsylvania

New York

Maryland

This Isn’t the Field of Dreams

• You can’t do a “build it and they will come” because nobody will support the “build-out” without a solid ROI

• Broadband will EVENTUALLY come to a theatre near you – how long are you willing to wait to see the movie or are you waiting for the video release?

• You must take the initiative locally to obtain broadband services in your near future

What is Demand Aggregation?

• What is it?• Aggregation of all internet usage within the

business and commercial sector of the community

Partnerships – Building Relationships

• Locally within the community• Regionally – multi-county• Partnerships may involve working with

existing service providers and building new alliances – key element

Issues Within the Community

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

This is a Business Application

• Business and commercial use such as traditional businesses, large educational and health sector users

• This process does not benefit residential users

Sparkplug Needed!!

• AC, Champion, or Autolite? [Guy’s thing!]• A “strong” locally committed individual or

organization to champion the entire effort from beginning to end

• You must have a SPARKPLUG or the process will fail

What’s Needed?

• Committed local citizens (sweat equity)• Contributed local services including

meeting space, printing costs, etc.• This is not a cheap undertaking you may

need Big Bucks (and we aren’t talking about the four legged kind with antlers)

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

the Mail!)

• Not a short term effort• You may not get a marriage proposal or a

solid business case that makes sense to a service provider

Six Case Models

The Findlay Ohio Model

• Issues:• Lack of high speed access• No local POP (we’re not talking about

sodas and soft drinks!!)• Strong businesswoman became Sparkplug.• Three sector collaboration model; business,

health and private higher education/college

Findlay Model Continued…

• Process began in March 2000• Off-shoot of E-COM Ohio study• Established Telecom Infrastructure

Committee (TIC)• Average core of 5-15 members• All members were invited• Formal subcommittee of Findlay Chamber

of Commerce

Findlay Model Cont…

• Conducted two studies to determine Demand for services

• First study focused on key business and major IT users

• Second study went to 30-45 businesses• Sparkplug/chairman of TIC committee

coordinated all communications between members


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

committee


• Service providers initially contacted• No involvement once the planning process

started• At completion of planning process, vendors

were invited to make a presentation• 15 providers made presentations including

telco, cable, ISPs and others


• TIC concluded that service providers would not make investment in infrastructure because demand did not generate enough ROI

• TIC decided to fund infrastructure development through private venture capital funds - $500 K


• POP was installed and turned up on 9/1/01• Created “Silicon Alley” in CBD to serve

major businesses in community• A for-profit company was established to run

the new ISP• www.centracomm.net

http://www.centracomm.net/


• Centracomm continues to expand• Service providers immediately started

offering DSL and cable modem and other enhanced services once the POP was in place


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

Dalton GA Utilities Model

• DU was looking for a means to connect its numerous off-site facilities in the community to its central HQ to improve management over-site

• DSL and cable modem services were not available

• DU decided to install fiber infrastructure

Dalton Model Cont…

• DU provides water/sewer/gas/electricity service to the community

• Many large business users are in close proximity to DU off-site facilities

• DU is part of a statewide wholesale electric service provider)


• Planning committee established in Sept 1998

• Small committee (CEO and 2 IT managers)• Initial concept was internal business

application• When getting ready to string fiber, DU

decided to overbuild and offer commercial service to schools, etc.


• Planning phase was short; based on internal requirements

• ROW access was not an issue because DU owned existing utility poles and R-O-W

• Initial planning to fiber placement took one year in duration

Dalton Model Cont..,.

• DU decided to use an ATM network with six switches [lots of horsepower – mid-sixties muscle car!!]

• DU constructed a mesh network design with built-in redundancy

• Network included wireless applications with antennae on existing water towers (convenient if you happen to own all the water towers!)


• Entire project was internally funded by DU• A consultant was used for engineering

design and fiber placement• DU conducted a survey of key businesses in

close proximity to DU’s facilities


• DU held an open house for large industrial companies to showcase the fiber network

• DU produced a public information video to be run on local community TV network

• New ISP providers have come into the community

North Carolina Model

• 23 county effort• Initial discussions began in 1993• In 1995, Appalachia NC became involved

in a statewide strategic telecommunications planning effort

• ARC underwrote the Appalachian Region

NC Model Cont…

• In Spring 2000, ARC began funding a Demand Aggregation project in the 23 county area

• Southwestern Community College became the Sparkplug for the project

• SCC invited other major partners to participate• Five to eight key individuals coordinated the

whole project efforts

NC Model Cont…

• Purpose was to secure high speed access for economic development purposes

• Steering committee was formed• A technology advisor and legal advisor were

added to the steering committee – Pro Bono• Local planning officials, economic development

individuals and 14 Chambers of Commerce participated in the project

NC Model Cont…

• Four committees were established; business, legal, political and technical

• Over 100 organizations participated on the committees

• Each member was required to sign a non-disclosure/confidentiality agreement – this was a key element that was critical in moving the project along!!

NC Model Cont…

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

NC Model Cont…

• A major survey and data collection process was undertaken

• $12.6M plus in demand usage was identified (internet/local and LD)

• Analysis was done of existing telephone bills

• This was an eye-opening experience and not a Bloody Mary in the morning!!!!!

NC Model Cont…• This allowed the steering committee to share normally

‘protected confidential data’ with potential service providers who were willing to sign non-disclosure agreements

• A second demand aggregation survey was undertaken and more demand was identified

• The project has just been completed with the development of a for-profit / non-profit partnership arrangement that will build numerous interconnecting sections [both last mile and middle mile] to connect to existing telecommunication infrastructure.

NC Model Cont…

• In January 2002, a $4.3M federal grant from the Library of Congress was approved that would underwrite deployment of fiber optic network to serve schools and libraries. In FY 2003 an additional $10M was approved by a Congressional earmark.

• Incidental costs associated with the planning process were absorbed by local committee members

NC Model Cont…

• ARC invested $582k in the demand aggregation project – including salary, travel, supplies, marketing and advertising costs, web-page development and other services

• Numerous consulting and legal services were provided pro bono

NC Model Cont…

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

NC Model Cont…

• From the beginning, the steering committee was seeking a service provider “alliance partner[s]”

• Initial contacts with telcos were not encouraging

• Service providers indicated they would be interested in the project findings

NC Model Cont…

• Initially, service providers felt there was not enough demand to warrant the infrastructure investment

• After $12.6M of demand was identified, two service providers were considered as being possible alliance partners

• One of the providers decided that there simply was not an adequate ROI and withdrew

NC Model Cont…

• The second provider was contacted• A number of issues were identified; ownership of

equipment, the need for subsidized funding; middle-mile connectivity concerns were paramount, ROI projected to far into future, sharing of annual revenues between service provider and non-profit organization

• So, is it really possible to have a revenue sharing arrangement with a service provider?

NC Model Cont…

• Persistence pays off…..• In late 2002 “Wholesale Transport” costs began to

tumble [$1,600 / $20 anywhere on net] and as a result numerous secondary service providers became potential partners.

• A new 501 organization was established in order to own and deploy infrastructure

• New telecommunication competition came into the market place, prices continued to drop, and deployment is occurring!!!!!!!

Sonet Ring and POP

• In partnership with DukeNet and other providers a 214 mile 48 strand - Sonet ring is being established

• A POP has been established in Asheville that is linked to Greenville’s POP, and the POP in the Research Triangle.

• The State of NC and local partners provided funding for the network

• Pricing on the ring is priced at Tier 1 level – like Washington DC! A total Win!!!!!!!!!!!

The Berkshire Connect Model

• In the mid-90’s, two major companies left the area which resulted in 13-14,000 people losing their jobs

• Several new tech firms moved into the area and needed high speed access

• T1’s were available from telco but there were service quality issues and pricing was a major concern for the small business sector

• Existing local businesses had pent-up demand for increased telco services

BC Model Cont…

• Community leaders recognized the need to improve their economic development base

• Increased telco services were viewed as an integral part of future economic / social development of the community

• Initial planning group started in 1996• All four sectors were involved in the initial planning

stages• Local Planning Commission became the

coordination organization

BC Model Cont…

• Mission was twofold: expand high speed access and lower existing LD rates within the business community

• This was a business/commercial user model (did not include residential users)

• In the early stages, there were community-wide seminars to discuss steps to be taken

• Local press attended these initial seminars

BC Model Cont…

• Three committees were established; cultural arts, education, and business/industry

• Some members were recruited; all were volunteers• A “coordinating task force” was established to

coordinate the overall process• A “critical user” sub-committee was eventually

formed to address technical issues

BC Model Cont…

• The critical user sub-committee became bogged down (in a quagmire of technical muck jargon and lost their way in the swamp!!)

• They couldn’t figure out which technology would work best – fiber vs wireless, radio vs microwave, satellite vs 2- tin cans on a tight string!!!!

BC Model Cont…

• The coordinating task force met monthly and all other committees met as needed

• Beginning in the Fall of 1997, a consultant was hired to develop a business plan and address the technical network issues

BC Model Cont…

• A survey was done of the major business users to gather information on their use of T1 lines, the cost of service, and the quality of service

• The survey also explored additional high speed line needs of the business community

• A key component for the businesses was lowering LD rates

BC Model Cont…

• The project was begun with a $500K grant from a State Technology Fund

• The community also floated a $1M bond issue to raise additional capital for the future potential of the deployment of technology

• The overall planning project took 2.5 years to complete

BC Model Cont… Engineering

• It was determined a microwave/radio solution appeared to be the most practical and cost effective solution to reach the nearest POP (an existing microwave tower was on a mountain nearby

• It was determined that vendor pricing must be based on a flat rate model as opposed to distance sensitive pricing

• It was also determined that there needed to be quality of service improvements over existing telco offerings and substantial reductions in LD

BC Model Cont…

• The project was put out for bidding to a variety of service providers – both ILEC and CLEC

• The local cable service provider was not considered a potential viable service alternative

• The local telco was not considered a potential viable service provider based on the existing distance sensitive pricing

BC Model Cont…

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

• [email protected]

BC Model Cont…

• Two competitive service providers (CLECs) were ultimately selected to provide the services requested in the RFP

• Global Crossing and Equal Access were selected to provide the following services (lower cost T1 access, improved quality of service and lower LD pricing)

• Business LD pricing was anticipated to be reduced from 9 cents per minute to just over 2 cents per minute

• One company realized a $45k monthly savings!

BC Model Cont…

• The Global Crossing/Equal Access solution required a staged build out process

• 25 or more “new customers” were needed to warrant further construction of the network (the network was deployed incrementally)

• The new BC network is currently serving in excess of 65 non-residential customers

BC Model Cont…

• After the BC network became operational, several ISPs came into the area and began to offer services

• The BC DA model is being replicated in other New England communities

BC Model Cont…

• Global Crossing has just come out of Chapter 11 bankruptcy protection

• Other replicated models have been on hold pending the outcome of the bankruptcy petition

• It is anticipated that these communities will now move ahead

Blacksburg Electronic Village

• University based project in Blacksburg VA• Blacksburg has a population of 36,000; about 85%

of the population is affiliated with VA Tech• BEV was initially funded by a grant from VA

Tech• In 1993, dial-up access was offered to the city• Alliances were initially forged with teleco

BEV Cont…

• In 1994, ISDN and Ethernet connections were offered in the city

• Today, almost 87% of businesses in Blacksburg are internet users with 75% advertising on-line

• 60% of Blacksburg residents have access to broadband connections

• In progressive stages, components of the network and customer base was turned over to private companies

BEV Cont…

• BEV works closely with the Town of Blacksburg, local civic groups, business and individuals to ensure that internet tools are used

• BEV is also getting involved in e-commerce activities and other uses of broadband services

BEV Cont…

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

community??

La Grange GA Model

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

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

employment

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

La Grange Cont…

• The city council and the city’s economic development project manager became the Sparkplug for the project

• The Chamber of Commerce played an integral part in the overall process

La Grange Cont…

• In early 1990’s the city established a telecom committee

• In 1992, the city hired an engineering firm to examine existing telecom infrastructure and outline future needs

• In 1993, the city entered into negotiations with local telco to address city’s future needs and expectations

La Grange Cont…• Local telco could not initially respond to city’s needs

based on ROI• The city is a provider of water/sewer/gas/electricity –

similar to Dalton Utilities • In 1993-5, the city placed a 4 mile fiber ring around

the city and leased it back to the telco• In 1995-6, the telco installed a digital switch• In 1997, the city filed as a competitive local exchange

carrier (CLEC) for businesses and institutions

La Grange Cont…

• In 1998, city established public/private venture with the local cable company to provide broadband access

• The city financed a HFC cable and leased back to the cable company

• The city has spent over $11M up to this point

La Grange Cont…

• In March 2000, the city announced broadband Internet access through the establishment of the LaGrange Interactive TV service (LITV)

• The LITV is a web-based TV access to the internet

• This permitted E-mail and web surfing through a wireless keyboard

La Grange Cont…

• By August 2000, 1500 units were installed in residential homes

• By September 2001 - 4,377 units were installed in residential homes

• The city created a web portal loaded with specialized content on how to use the web TV appliance

• Cable TV provides training program on how to use of the LITV system

La Grange Cont…

• Additional content is routinely added by the community to the web site

• The city invested over $420k in the web TV appliances and installation costs

• The city installed all systems• The cable company then reimbursed the

city for installation costs

La Grange Cont…

• Results:• City residents are learning computer skills from

home• Web content compliments school curriculum• A job listing service has been established on the

web-site• City-wide communication has increased• Local E-commerce applications were developed

La Grange Cont…

• 35 new industries have now located in the community

• Textile industry decline has continued

La Grange Cont…

• Key Elements:• Numerous lease back arrangements were

established with telco and cable• Essential alliance partnerships were established

with telco and cable• System expansions were based on solid business

decisions• City did not attempt to compete with telco or cable

La Grange Cont…

• City was fiscally conservative throughout the entire process

• Cable company provided discounted services to city as part of leased arrangements

• Internet service in the city is currently free of charge through 2003

La Grange Cont…

• Through the entire process, the city has changed its economic development image

• The LITV program has increased product marketing throughout the city

• Basic educational skills have been improved by the use of the LITV

How do you Interact with the Current Service Provider?

• First approach existing telco/cable provider to solicit support

• If existing provider is unable to provide affordable high speed access into community, you may need to consider DA

• Upon completion of DA process, present results to existing providers

Do You Need a Business Plan?

• YES• You cannot sell your concept without a

business plan (or “Have we got a bridge for sale!!”)

• You need a plan to obtain funding from any source

How is the Plan Actually Used?

• Proves the fiscal viability of the DA project• Selling point within the community• All financial partners will ask you right-up-front

for your business plan.• You need it to solicit support from potential

service providers and essential alliance partners• Needed in RFP bidding process• Garner political support if needed

Demand Disaggregation

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


• Education networks involving state or regional educational entities (OH VA PA GA AL NY TN etc.)

• Health sector using private networks to connect facilities (GA AL PA OH NC SC)

• Government networks connecting state facilities and local facilities (GA NC TN etc)

• Businesses using private networks –WalMart, GM Ford, Chrysler, and other local based businesses


• E-rate funding• Satellite access

How to Finance DA Projects

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

Who Leads The Charge• Dynamic community oriented individual is a must

(Sparkplug)• Local government• Utility district• Higher education facility or health organization• Local planning commission (council of gov’t)• Chamber of Commerce or local business leader • Non –profit• Other?

Timeline for the Broadband / DA Project

• How long does it really take?• The telecommunication industry is still in

turmoil• Strategic alliances are critical from the very

beginning of the process• Strength of the Sparkplug to coordinate and

keep the process focused• This is not a 12 month process

Organization of Committees

• Not all DA projects will require all committees

• Background of participants will dictate need for specific committees

Potential Committees

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

Committee Members

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

Role of Consultant

• Do you need a consultant?• For Technology issues…• For Legal issues…• For development of strategic/business

plan…• For funding issues…• For overall coordination of process…

Will Demand Justify the Investment?

• There may not be enough demand to justify the expense of deployment by existing service providers

• Seek competitive alternative service providers

• There may not be enough demand for any service provider to deploy infrastructure without financial assurances

If That Happens …• This is where you have to become very proactive:• Work with state PSC • Become active in 271 applications• Participate in potential over-earning reviews• Monitor previously filed technology deployment

schedules • Work the political process• Float a local bond issue as leverage

The Technology

• Do not limit your thinking to one technology solution (Don’t throw out the baby with the bath water!)….

• Fiber or other traditional land lines• Wireless radio• Wireless microwave• Satellite• Cable• Or a combination thereof!

Public Infrastructure Ownership

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

Is This a worthwhile Effort?• The “take rate” for high-speed telecommunication

services is still about 20 – 25% nationally• Is it a demand issue or a supply issue?• Can you afford to wait from an economic development

point of view?• The DA planning process is similar to community

development processes that resulted in the roads, water and sewer systems that underpin our community economic development today

• You need to have a community on-ramp to the information highway!

Demand Aggregation Workshop and How to Bring Broadband Home

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