Broadband Feasibility Study Report CCG CONSULTING AND FINLEY

Broadband Feasibility Study Report CCG CONSULTING AND FINLEY ENGINEERING MAY 22, 2018

Project Goal To determine the financial feasibility of constructing a citywide fiber network to provide gigabit-capable broadband throughout the City. 2

The Feasibility Study § Engineering design for citywide fiber § Speed tests / bill analysis § Financial business plans § Risks and benefit analysis § Written report. 3

Benefits of Broadband § Expand customer choice § Digital divide – provide affordable broadband for everybody § Education § Economic development § Work-at-home economy § Healthcare 4

Potential Risks § TDS expanding download capabilities § Reaction of TDS to competition § 5 G might bring wireless broadband § Operational risks from entering a highly technical business § Ability to market and sell 5

Consequences of Not Building Fiber § Increasing prices § Affordability / digital divide § TDS monopoly / death of DSL 6

Network Design § Build fiber past every resident and business. § Includes some existing fiber § Selected PON technology § Neighborhood nodes § Biggest issue is getting access to existing poles 7

Cost of the Network Land & Buildings Operational Assets Customer CPE Fiber Electronics Drops Fiber Software Total 8 Buried $ 0. 4 M $ 0. 3 M $ 1. 7 M $ 3. 1 M $ 8. 3 M $ 0. 2 M $ 14. 3 M Lowest $ 0. 4 M $ 0. 3 M $ 1. 7 M $ 2. 1 M $ 5. 8 M $ 0. 2 M $ 10. 8 M

The Pole Issue § Access to Empire Electric poles is much higher than industry average § Burying the whole network equally as expensive § Might be possible to bypass downtown poles in alleys 9

Business Models Considered § Single Provider – the City is the ISP. § Open Access – allows multiple ISPs access to the network. 10

Financial Results – Retail Scenario § Funding with Bonds § All-Buried. Bond of $19. 3 M. With 50% penetration loses $19. 6 M over 25 years. § With lowest construction costs. Bond is $14. 6 M. With 50% penetration rate loses $11. 8 M over 25 years. § Funding with Sales Taxes § All-Buried. Sales Tax Bond of $15. 9 M. With 50% penetration makes $9. 4 M over 25 years. § With lowest construction costs. Sales Tax Bond of $12. 3 M. With 50% penetration rate makes $11. 0 M over 25 years. § Open Access. Loses about $15 M more than retail scenario 11

Open Access Scenario § City has nearly the same network costs with only cost of customer CPE going to the ISP. § Would be difficult to attract multiple ISPs to Cortez. § Underperforms other scenarios by approximately $15 M over 25 years. 12

Digital Divide Scenario § Would build fiber to every home. § Would provide free minimal broadband, perhaps 5 Mbps download. § With tax financing should slightly outperform the retail scenarios. 13

Key Findings of the Study § Many customers getting slower data speeds than what they are purchasing § Bills show pricing done by customer. § Funding with traditional bonds doesn’t work § Funding with sales tax or other tax can generate significant profits over time. § Open access is not feasible § Pole access is a huge issue 14

Recommended Next Steps § Residential survey to understand market demand. § More engineering work to quantify cheaper options for § § pole access Explore possibility of sales tax financing Consider the possibility of building to everybody Community education Understand the many steps required to build and operate a fiber business. 15

Contacts Doug Dawson, President, CCG Consulting blackbean 2@ccgcomm. com (202) 255 -7689 Chris Konechne, Finley Engineering ckonechne@finleyusa. com (507) 777 -2255 16