STUDY SESSION MEMORANDUM TO: Mayor and Members of City Council FROM: Jane S. Brautigam, City Manager Tanya Ange, Deputy City Manager Julia Richman, Chief Innovation and Technology Officer Steve Catanach, Electric Utility Development Director Bob Eichem, Chief Financial Advisor Debra Kalish, Senior Counsel Bob Harberg, Project Manager – Electric Utility Development Lex Telischak, Electrical Engineer Paul Williams, Network Planner Sarah Huntley, Engagement Manager Tanya Burden, Communication Manager Chris Meschuk, Assistant City Manager DATE: May 8, 2018 SUBJECT: Study Session on Boulder’s Broadband Initiative EXECUTIVE SUMMARY The purpose of this study session is to present to City Council the technical and policy analysis for various options and models for considering a broadband (also known as fiber to the premises or FTTP) network, and for council to provide feedback on the next steps for Boulder’s Broadband Initiative. The city, through its consultant, has completed a refined cost estimate for the various components of infrastructure to support a broadband initiative, as well as detailed cost models, policy analysis and technical analysis. In February, March and April, a variety of channels were used to inform the community about the project’s progress and encourage feedback, including a press release, multiple posts on Facebook, Twitter, LinkedIn and Next Door, and mentions in several city newsletters. 1 City Council Study Session Page 5 of 422 A project page on Be Heard Boulder has drawn 307 visitors and 45 people attended a Broadband Brainstorming event on April 11. Thousands have viewed the posts in social media. Five options for broadband business models have been identified: 1. Public-Private Collaboration – city contracts with private company to build and operate an FTTP network 2. City Backbone – city builds backbone and contracts with private entity to build the distribution network and operate the system 3. City Fiber Only – city builds the entire FTTP network and contracts with private company to be the operator 4. City Fiber + ISP – city builds the entire FTTP network and is the ISP 5. Refrain from acting – city does nothing Detailed analysis of these options is contained in the attachment reports and are summarized in the memo. Additionally, analysis of the relationship of broadband and a future municipal electric utility found approximately $2 million in construction cost savings, but this savings is not significant enough to change the business case for one model over another at this time. A clear connection between the two projects exists, as a smaller but none the less effective network infrastructure will be a required component of electric utility operations. Executing broadband prior to municipalization may enable more efficient implementation of the electric utility in the future. Staff is recommending further exploration and consideration of Model 2 (public backbone) and Model 4 (City Fiber + ISP) in preparation for a June 12 public hearing, where council will consider whether to proceed with a 2018 ballot item. QUESTIONS FOR COUNCIL Staff has prepared the following questions for council: 1. Should certain models, specifically Models 1 (Public-Private Collaboration) and Model 3 (City Fiber Only) no longer be considered for further study? 2. Does council agree with holding a public hearing on June 12 for further consideration of Model 2 (City backbone) and Model 4 (City Fiber + ISP), including additional analysis on adding service to low income neighborhoods within model 2, and a statistically valid survey to test take rate and pricing assumptions, in order to inform a decision on a 2018 ballot item? BACKGROUND In November 2014, the community approved a ballot measure (Item 2C) exempting the city from state limitations on telecommunication services. This measure established city autonomy to invest in community broadband services, which had previously been limited by Colorado Senate Bill 05-152. Without a voter-approved exemption, this law significantly restricts the ability of municipal governments to provide telecommunications services, including broadband services, either independently or in 2 City Council Study Session Page 6 of 422 partnership with private entities. The passage of Item 2C opened new opportunities to explore alternatives that would leverage and expand the community’s telecommunication resources. The city is now actively studying how to serve the connectivity needs of the community through construction of a citywide fiber-to-the-premises network, including leveraging its existing citywide fiber optic and conduit infrastructure, where feasible. The city’s vision is to provide a world-class community telecommunications infrastructure to Boulder for the 21st Century and beyond. Broadband connectivity is a critical infrastructure service for quality of modern life, as is the case with roads, water, sewer and electricity. Based on current guiding principles, this service would provide an opportunity for every home, business, non-profit organization, government entity and place of education to access a fast affordable, and secure connection, and to provide the infrastructure necessary to support future technologies, such as advanced mobility and sensor-based (Smart City) analytic infrastructures. In January 2018, council received an update on the project, including minor revisions to the project purpose and objectives, a project scope and timing to consider a potential 2018 ballot item, and a draft plan outlining potential community engagement approaches. The key takeaways from the meeting were that council: • Had mixed opinions about whether a 2018 ballot item should be considered. • Is interested in exploring the possibility of the city becoming an Internet service provider (ISP) and conducting a business plan analysis to understand more about this potential model. • Would like to review case studies with information and examples of how other communities have implemented the various options and models for broadband. • Expressed a greater interest in the options of city-built fiber and city-built fiber + city ISP, as compared to the public-private partnership model. Key staff action items from the meeting included: • Providing additional information and analysis about the front-end potential cost savings, efficiencies, and any relationship and synergies with municipalization to inform the timing of the city’s future broadband efforts. • Proceeding with analysis of broadband options to inform a spring 2018 study session. • Engaging members of the community with expertise or a high area of interest in this issue. 3 City Council Study Session Page 7 of 422 ANALYSIS The project team, in conjunction with the project consultant, CTC technology and energy (CTC), has been examining several different technical, financial and policy options related to the city’s broadband effort. This includes: 1. A refined network cost estimate and backbone design; 2. Analysis of options for broadband business models; 3. The relationship between broadband and a municipal electric utility; and 4. Exploration of funding options and constraints in light of other city projects, priorities and funding models. Each of these areas is expanded upon in detail below by section, with attachments of the consultant’s analysis containing greater detail. Section 1: Refined network cost estimate and backbone design In the winter of 2017, staff and CTC refined the 2016 feasibility study (Attachment H) cost estimate, as well as a schematic design and cost of a network backbone. This analysis included exploring costs for three levels of infrastructure deployment, as well as refining the assumptions behind the cost estimates such as boring costs, examining possible fiber routes, including route alignment with the City’s planned construction to separate the City’s electrical utility system from Xcel’s system, and verifying the amount of aerial vs. underground construction. The full report can be found in Attachment B. The results of the infrastructure cost estimates are as follows: Outside Plant Core and Network Subscriber Area (OSP) fiber Total Cost Hub Shelters Electronics Activation construction Backbone $8.8M– $10.5M – – – $8.8M– $10.5M Dark FTTP $62.3M– $74.7M $800K – $1M – – $63.1M– $75.7M Lit FTTP $62.3M– $74.7M $800K – $1M $6.9M– $8.3M $32.6M– $39.2M $102.6M– $123.2M 35% Take Rate To aid the reader’s understanding of the highly technical information below, a few key terms are defined below: • Backbone is a redundant network of conduit and fiber rings that supports a citywide FTTP network and could also be used to connect unserved city sites. Its design would be developed with sufficient capacity and distribution throughout the city to support potential advanced metering infrastructure (AMI) that would be part of a future electric utility and future Internet of Things, sensor-based (Smart City) analytic infrastructures in key locations, and to connect future electrical substations. The backbone is an essential part of any fiber network and the preliminary design for Boulder totals approximately 93 miles of fiber. 4 City Council Study Session Page 8 of 422 • Dark fiber FTTP network would be a citywide fiber network passing every premise in the city, but the network would not be providing Internet service or be connected to homes or businesses. • Lit fiber FTTP network includes all the necessary equipment to provide and connect homes and businesses to the Internet. • Outside plant (OSP) fiber construction is the cost of