Task 2 Report: Service Offerings & Target Broadband StandardsRecurring Charges (Connections): $600...

FTTP Feasibility Study for

The City of Fort Collins

Task 2 Report: Service Offerings & Target Broadband Standards

August 2016

Uptown Services, LLC Dave Stockton & Neil Shaw, Principals

2

Identify Market Segments (Task 2)

Identify Target Retail Offerings and Pricing (Task 2)

Video, Internet, and Voice for residential , small business, and complex segments

Establish ideal retail services definitions (regardless of business model)

Service Mix Options – Internet (Task 2)

Delivered Bandwidth

Direct Access

Service Mix Options – Video (Options Defined – Task 2 / Recommendation – Task 4)

Own video headend for direct satellite feed

Own video hubsite for terrestrial feed (eliminates video headend)

No Video

Feasibility Analysis of Business Structure Options (Task 4)

12/23/2016 Study conducted by Uptown Services, LLC

Market Segmentation

December 16 Study conducted by Uptown Services, LLC 4

Residential SFU Residential MDU Small Business Complex Business

Definition Residential single-family

dwellings (includes Work-at-Home)

Residential multi-dwelling units

(e.g. apartments)

Businesses establishments with

0 – 19 employees

Businesses & Institutions with 20+ employees

Size Units TBD (X%)

(1 and 2 unit attached or detached)

Units TBD (Y%) (3 or more units)

Units TBD (Z% of businesses)

Units TBD (Z% of businesses)

Growth Rate 0.5% Annual TBD

Barriers to Conversion Very Low

Low, however Right of Entry agreements need to

be secured prior to extending FTTP to the

property

Low, but slower diffusion due to

incidence of service contracts

Medium, due to term contracts and

time to establish brand credibility

Projected FTTP Market Penetration

Internet: 38.8% Video: 24.6% / 20.9%* Phone: 28.6% / 14.3%*

Internet: 45.0% Video: 14.2% /

11.2%** Phone: 41.0%

High Cap Data: 20%

Research Approach

Quantitative Phone Survey (n=400)

Quantitative Phone Survey (n=50)

In-Person Depth Interviews

(n=24)

* Year 5 eroded. **Year 7 eroded.

Competitive Analysis & Broadband Standards

Internet and Data Services

December 16 Study conducted by Uptown Services, LLC 6

December 16 7

The DOCSIS cable modem standard has evolved and will attain another capacity increase during 2016 with the testing and deployment of DOCSIS3.1

DOCSIS 3.1 works by using a much denser compression scheme via 4096 QAM and a new channel division multiplexing protocol (OFDM). This has reduced channel width from 6 MHz to 20-50 kHz, enabling bonding of carrier channels into a frequency block of 192 MHz.

The upgrade requires cable modem replacement and firmware upgrade to the deployed CMTS platform. Outside plant changes to the HFC distribution network are not required.

Comcast has completed initial testing and is starting commercial rollout in select areas of Atlanta. Announced pricing is $70 (3 year contract) or $140 (rate card).

Maximum Synchronization Speed (Maximum Usable Speed)

DOCSIS 1.x DOCSIS 2.0 DOCSIS 3.0 DOCSIS 3.1

Downstream 42.88 (38) Mbps 42.88 (38) Mbps 171.52 (152) Mbps Standard: 10 Gbps

Initial Modems: 4-5 Gbps*

Upstream 10.24 (9) Mbps 30.72 (27) Mbps 122.88 (108) Mbps 1 Gbps

Year Deployed 1997 2005 2008 2016

* Due to backward compatibility requirement of initial 3.1 modems with DOCSIS 3.0.

12/23/2016 8

Download Upload Price Technology

Comcast

10M 25M 75M

150M* 250M*

2M 5M 5M

10M 25M

$49.95 $59.95 $74.95 $89.95

$149.95

Cable Modem

(DOCSIS 3.0)

2G* (limited availability

within 1/3 mile of fiber network)

2G MRC: $299.95 NRC: $1,000

(2 Year Term Contract w/ Penalty) Fiber

1G 1G Monthly: $140 3 Year Term: $70

Cable Modem

(DOCSIS 3.1)

CenturyLink

1.5M 7M

12M 20M

40M*

896k 896k 896k 896k 5M

$44.00 $49.00 $54.00 $64.00 $74.00

DSL

Prices reflect subscription to Internet service at non-promotional rates. CenturyLink pricing per centurylink.com. Comcast pricing from xfinity.com as of March 2016 and published ‘Services and Pricing’ brochure. *Not available in all areas of Fort Collins

Study conducted by Uptown Services, LLC

12/23/2016 9

FTTP System Comcast

DOCSIS 3.0 Comcast

DOCSIS 3.1

Discount

50M / 50M Tier $39.95

Comcast 75M / 5M Monthly: $74.95

12-Month Term: $49.99 - 47%

20% on Promo

1G / 1G Tier $99.95

Comcast 2G $299.95

Comcast 1G Monthly: $140

36-Month Term: $70

DOCSIS 3.0: 67% DOCSIS 3.1: 29%

1G / 1G Charter Member

$49.95

DOCSIS 3.0: 83% DOCSIS 3.1: 64%

WiFi ONT Upgrade (80211.ac)

$7.95 $10.00 20%

Affordable Internet 100M $10.00

Affordable Internet 25M

$10.00

Note: Prices reflect providers single-service Internet rate card pricing unless noted.


12/23/2016 10 Study conducted by Uptown Services, LLC

12/23/2016 11

Heavily discounting the 1G tier actually improves financial performance compared to traditional municipal Internet pricing tactics as demonstrated in Longmont…


12/23/2016 12

1. Standard Internet Access Shared capacity connection over GPON No contract requirement and no SLA guarantees Can upgrade to symmetrical bandwidth and add BGP Routing (some tiers)

2. Dedicated Internet Access Dedicated capacity via ActiveE connection (same ONT) Requires dedicated fiber strand. Practical option for pure commercial service areas Contract agreement with SLA and term requirement

3. High Capacity Direct Fiber Access Multiple connection options:

Direct routed connection

Customer CPE connection (either non-protected media converter or protected)

Protected connection is optional Contract agreement with SLA and term requirement Resale rights may be included

4. Point-to-Point (Transport Circuit): Dedicated pathway of defined capacity without access 5. MAN: Customized access and transport solution for multi-site business or institution


12/23/2016 13

GPON Access ActiveE High Cap

Bandwidth Shared Asymmetrical Symmetrical Optional

Dedicated Symmetrical

Network Connection ONT ONT

(dedicated strand) Point-Point or Protected

BGP Routing Optional (100M+ Tiers) Included (restrictions apply)

Protection No Optional (Fees Apply)

Pricing Standardized via Rate Card ICB Pricing via custom quote

Term / SLA No Contract Contract: 3 Years Minimum SLA Terms Negotiated

Tiers & Pricing 6 Tiers ranging from 25M to 1G Optional upgrade to symmetrical

2 Tiers • 500M: $1,500 ($3/M)

• 1G: $2,000 ($2/M)

ICB Pricing • Tiers from 500M to

10G+ • Target Per Meg pricing $5/M to

$.50/M

Resale Rights No Optional (Fees Apply)

12/23/2016 14

Download Upload Price

Rate Card / Promo Technology

Comcast

16M 25M 50M 75M

100M 150M

3M 10M 10M 15M 20M 20M

$69.95 $99.95

$109.95 $149.95 $199.95 $249.95

Cable Modem (DOCSIS 3.0)

CenturyLink 12M 20M 40M

Not Disclosed

$106.25 (24 mos.) $136.00 (24 mos.) $216.75 (24 mos.)

DSL

Note: Prices reflect providers single-service Internet rate card pricing. Comcast pricing from comcast.com as of March 2016 . CenturyLink pricing from centurylink.com as of March 2016 .


12/23/2016 15

City Download / Upload

City Price

Incumbent Comparable Incumbent Price Discount

25M / 5M Add Symmetrical

$59.95 + $10 Comcast 25M $99.95 40%


$69.95 +$30 Comcast 50M $109.95 36%


$89.95 + $50 Comcast 100M $199.95 55%


$199.95 + $100 - - -


$349.95 + $150 - - -

1G / 500M Add Symmetrical

$599.95 + $200 - - -

Note: Prices reflect providers single-service Internet rate card pricing.


12/23/2016 17

1. Standard Internet Access Capacity Tiers from 25M to 1G with average MRC of ≈$70

2. Dedicated Internet Access Capacity Tiers of 500M and 1G symmetrical with average MRC of $1,500

3. High Capacity Direct Fiber Access Capacity Tiers of from 500M to 10G symmetrical with average MRC of $3,000

4. Point-to-Point Transport A private circuit with dedicated capacity between 2 or more client locations

(e.g. branch office to server location) Capacity Tiers from 100M to 10G Customized terms dependent upon construction cost, protection required,

and off-network hand-offs) Average MRC of $1,500

5. Metropolitan Area Network Example next slide


12/23/2016 19

Connections: 29 sites with 10G initial capacity with scalable upgrade option

Ring Transport Capacity: All sites receive redundant 20 Gig connections (lagged 40G) with scalable upgrade option

Protection: Self-healing ring design (excludes laterals)

Network Demarcation: Switch port on the City fiber ring

City Maintenance: All electronics, fiber ring and fiber laterals

10 year term

Non-Recurring Charges: $0

Recurring Charges (Connections): $600 per site (10G)

Recurring Charges (Ring Transport): $.50/M initial (20G)


12/23/2016 20

Contract term of 3 years with auto-renewal

Incremental construction cost recovered during the initial term

Minimum capacity commitment with potential for increase(s) during the term

Protected route options (optional)

Service Level Agreement Terms

Availability

Latency

Packet Loss Ratio

Outage credits

Maintenance windows and advance notification

Escalation and notification procedures


12/23/2016 21

Direct Access Configuration

Tran

spor

t Lease 2 10G transport circuits to 910 15th Street in Denver • A Location is 300 Laporte Ave • Z Location is Meet Me Room at 910 POP • Provider “A”: 10G circuit for $13,126 MRC/$0 NRC and 3 year term • Provider “B”: 10G circuit for $8,070 MRC/$200 NRC and 3 year term

Acce

ss Lease 2 backbone connections at 910 15th for 10G capacity (CDR) on each

• Provider “A”: 10G Bandwidth for $7,900 MRC/$0 NRC and 2 year term • Provider “B”: 10G circuit for $3,400 MRC/$0 NRC and 5 year term • Lease IP addresses (IPv4). Budget at 40¢ each.

Oth

er

Fees

X-Connect: $250 MRC per circuit x 2 = $500 MRC

There are 2 strategy options for the City to acquire the necessary bandwidth to provide Internet access service:

A. Contract for delivered bandwidth to the City network headend from a service provider B. Lease/build a transport circuit for direct access to a major POP and separately lease

bandwidth from another provider via x-connect to their cage The direct access solution is more efficient, even at launch, given the scale of the Fort Collins FTTP system with a composite cost of $1.63/Mbps ($1.06 for transport and $.57/Mbps for bandwidth)



Video Services

12/23/2016 24

1. Bundling: Does offering video service improve the penetration results of Internet

service via bundling?

2. Architecture: Are there less capital-intensive options for offering video minimize

this ROI risk?

3. Return on Investment: Can the fixed costs associated with offering traditional video

be recovered prior to widespread adoption of virtual streaming video services?


December 16 25

Market forces have dramatically impacted video gross margins from a combination of subscriber loss and escalating video COGS…

Source: CPWS Comprehensive Annual Financial Report, 2014-2015

12/23/2016 26

Margin Erosion Sub loss due to value destruction from rate increases and no perceived increase in value Gross margin has been halved by programming cost increases despite these rate increases

Ongoing Capital Investment Traditional QAM systems out of capacity face a major capital investment to migrate to IP

video (hardware, software, set tops) Headend capex continues in all systems due to MPEG4 adoption and vendors’ end of life

announcements

Loss of Competitive Advantage Existing traditional Cable Systems had market protection as a duopoly via last mile

infrastructure and franchise agreements entry barriers. Key assets were last mile infrastructure and local operations.

New ‘Virtual Video Providers’ (OTT) will have ubiquitous market reach across the U.S. via the broadband connection. Key assets will be national brand power and consumer platform integration.

National consumer brands can leverage their brand, existing consumer base, and huge cash positions to quickly capture market share (e.g. Google, Apple…)


12/23/2016 27

Sling TV Launched by Dish Network Includes ESPN. Excludes broadcast channels. Multi-platform including Roku, Xbox One, Amazon Fire TV, etc. $20 per month and 100,000 subscribers.

Sony 50 channels of content via PlayStation box Launched in New York, Philadelphia, and Chicago Includes CBS, NBC, Fox

Apple In talks with major programmers sourcing content deals Will offer 25 channels including ABC, CBS, and Fox Pricing range of $30 -$40 anticipated


12/23/2016 28

Service Package Comcast 1 FTTP System (2016 – Year -1)

Discount to Comcast

Basic $30.45 $26.95 11%

Expanded Basic $74.74 $66.95 10%

Digital Basic $93.24 $81.95 12%

Digital Tiers Sports: $9.99 Latino: $16.95

Sports: $10.00 Latino: $10.00 -

Premiums $19.99 each $20.00 each -

DB + 2 Premiums $2 discount - $119.95 -

DB + 3 Premiums $5 discount

$128.24 HBO/Starz/TMC $136.95 + 7%

DB + 4 Premiums $9 discount

$148.24 All premiums + Sports $162.95 + 10%

Set Top Box Fee HD/HD with DVR $10.00 / $19.95 $7.95 / $17.95

Whole Home DVR $19.95 $19.95

1 All Comcast package rates include a Broadcast TV surcharge of $3.75/mo. Study conducted by Uptown Services, LLC

Uptown estimates video margins will continue to erode. Estimates based upon: Linear channel cost increases of 6% annually. Off-airs forecast individually based on

election cycle Basic rate increases of 10% annually except 2018 (20%), 2021 (30%), and 2024 (20%) Expanded Basic rate increases of 8% annually.


12/23/2016 32

Own Headend Vubiquity LiveVU

Content Delivery & Reception

Direct Feed via satellite (linears) and tower reception (off-airs)

Direct Feed via 10G terrestrial fiber network (linears) and tower reception (off-airs)

Buildings & Land

Tower site and 2,000 sq. ft. room with desk space for 12 FTEs ($250k)

Tower Site and 2 racks with desk space for 12 FTEs ($100k)

Opex Requirements

Utilities & Insurance: $75k Software Annual Maintenance: $100k

Utilities & Insurance: $25k Software Annual Maintenance: $100k Transport Fee: $2.50/Sub/Month Annual Maintenance: $2500 Leased transport circuit (to LiveVU’s Denver POP): Dedicated circuit at $8k/Month from Global Capacity

Fixed Capital Requirements

TOTAL: $2.7M Video Processing Equipment: $1.3M Off-Air Tower & Antennae: $150k Powering: $300k Project Management/Integration: $200k Middleware/CAS Licensing: $820k (10k subs)

TOTAL: $1.2M Gateway & Professional Services: $20k Video Processing Equipment: $150k Off-Air Tower & Antennae: $150k Powering: $100k Project Management/Integration: $30k Middleware/CAS Licensing: $820k (10k subs)

Variable Capital Requirements

Set Top Boxes: HD=$100 HD/DVR=$225

A national linear cable feed backbone can provide terrestrial delivery of most cable channels to video distributors. This can replace the vast majority of the headend investment.


12/23/2016 33

Important data points regarding bundling: 1. While bundling is still prevalent, it is losing importance over time.

40% of households are bundled via one provider in Fort Collins

However, the percentage of households rating bundling as ‘Very Important’ is only 18%

2. Comcast’s percentage of triple play subs has flattened at 37%

3. Longmont market results clearly demonstrate that a ‘No-Video’ strategy does not limit Internet penetration results



Voice Services

12/23/2016 35

CenturyLink Comcast FTTP System Discount to

CL / Comcast

Package Line Only LD per Minute $17.00 - - -

Line & Features LD per Minute

$35.00 11 features

$20.00 3 features - -

Line & Features Unlimited LD

$49.00 $44.95 $39.95 Bundled $34.95 Bundled 29% / 13%

Subscriber Line Charge Yes No No -

CenturyLink prices from centurylink.com Comcast pricing from comcast.com as of March 2016 and published ‘Services and Pricing’ brochure.


December 16 36

Service CenturyLink Comcast FTTP

Line & Feature Packages

Business Prime (3 Calling Features)

Monthly: $40.00 1 Year: $36.00 2 Year: $34.00 3 Year: $32.00

- -

Choice Business (3 Calling Features and Voicemail)


- -

Choice Business Plus (15 Calling Features)


$29.95 2 Year Term

(New Customers)

$44.95 (8 Features & Unlimited LD)

With Internet Monthly: $29.95

2 Year: $24.95 3 Year: $22.95

Without Internet Monthly: $39.95

2 Year: $34.95 3 Year: $32.95

Long Distance Unlimited Domestic $28.00 Included Add $2/line

December 16 37

Service CenturyLink Comcast FTTP

(Contract Required)

ISDN / SIP Trunks

Primary Rate Interface Access / Per B Channel (23B+D)

Facility Charge Monthly: $150

3 Year: $127 5 Year: $110 7 Year: $108

Per B Channel

Monthly: $30.49

$26.04 - $32.13 depending upon

bandwidth

With Internet 2 Year: $24.95 3 Year: $22.95

Without Internet

2 Year: $29.95 3 Year: $27.95

12/23/2016 38

Function Operational Responsibility FTTP System CLEC

Capital Local Loop and Premises NIU

Fiber MUX, Transport, and Switch

Interconnect LNP, Operator Services, PSAP, IC Agreements

Marketing & Sales Advertising, Sales

Brand, Pricing

Provisioning Work Order Creation

Bell Processes

Switch Provisioning

Customer Install

Billing Bill Fulfillment

Call Detail Record (LD), Taxes & Fees

Internet Backbone Interconnection


12/23/2016 39

FTTP Retail

Wholesale Rate FTTP Share Dispersion

Contribution per Line

Residential Unlimited local & LD $34.95 ≈ $10.00 ≈ $25 100% ≈ $25

Commercial (Unl. LD)

Business Package (Monthly) $29.95 ≈ $12.00 ≈ $18 40% -

Business Package (2 Year) $24.95 ≈ $12.00 ≈ $13 20% -

Business Package (3 Year) $22.95 ≈ $12.00 ≈ $11 40% -

Total Commercial ≈ $14


Task 2 Report: Service Offerings & Target Broadband StandardsRecurring Charges (Connections): $600...

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Transcript of Task 2 Report: Service Offerings & Target Broadband StandardsRecurring Charges (Connections): $600...