Copyright © 2003 – McKibben Consulting – All Rights Reserved – Unauthorized Use Prohibited LOMPOC BROADBAND SERVICES FEASIBILITY STUDY FINAL REPORT Submitted on December 1, 2003 by: McKibben Consulting 10018 Nevada Avenue Chatsworth, CA 91311 (818) 998-1544 www.mckibbenconsulting.com Copyright © 2003 – McKibben Consulting – All Rights Reserved – Unauthorized Use Prohibited TABLE OF CONTENTS Section I - Executive Summary Of The Findings.............4 A. Is a High-Speed Broadband Network for Lompoc Even Feasible?................................ 4 B. Is There Enough Public Demand To Support Such A Network?................................... 4 C. What Do People Think About The City Providing These Services?.............................. 4 D. How Is It Working In Other Cities?.................................................................................. 5 E. Shouldn’t The Private Sector Be Doing This?.................................................................. 5 F. Is Fiber-To-The-Home The Best Solution For Lompoc?................................................. 6 G. How Risky Is This For The City?...................................................................................... 6 H. How Does Wireless Best Help The Goals Of The City? .................................................. 7 I. Should The City Deploy Both Fiber And Wireless? ......................................................... 8 J. How Do We Get Started?.................................................................................................... 8 Section II - Types of Broadband Technologies.................9 A. FTTH PON – Fiber-To-The-Home Passive Optical Network ....................................... 10 B. LML Metro Area Optical Network (Last Mile Link)..................................................... 16 C. HFC (Hybrid Fiber-Coax)................................................................................................. 18 D. Wireless or “Wi-Fi” (IEEE 802.11b)................................................................................ 19 E. BOPL (Broadband Over Power Line) or PLC (Power Line Communications) .......... 22 Section III - Conceptual Design of System.....................23 A. CATV Head-End – (Cable TV Video/Audio Origination Equipment)......................... 30 B. Telephony Sub-System....................................................................................................... 34 C. Internet Access ................................................................................................................... 37 D. Management Support Systems ......................................................................................... 38 E. SCADA Support ................................................................................................................. 38 F. Public Safety Support......................................................................................................... 38 Section IV - Base Business Model..................................39 A. Summary Analysis ............................................................................................................. 39 1. Residential Market............................................................................................................ 40 2. Residential Revenue.......................................................................................................... 41 3. Commercial Market .......................................................................................................... 42 4. Commercial Revenue........................................................................................................ 43 5. Cost of Services Provided................................................................................................. 43 6. Operating Expense............................................................................................................ 44 7. Personnel Expense ............................................................................................................ 45 8. Capital Expense ................................................................................................................ 46 B. Proforma & Cash Flow Analyses...................................................................................... 47 C. Base Model Scenarios ........................................................................................................ 48 D. Base Model Alternatives.................................................................................................... 49 E. Wireless Internet Service................................................................................................... 49 1. Wi-Fi-based Internet Service ............................................................................................ 49 2. Wi-Fi Scenarios ................................................................................................................ 51 3. Combined Fiber and Wi-Fi Model.................................................................................... 51 December 1, 2003 Lompoc Broadband Services Feasibility Study 2 Final Report Copyright © 2003 – McKibben Consulting – All Rights Reserved – Unauthorized Use Prohibited Section V- Business Case................................................53 A. Staffing Summary .............................................................................................................. 53 1. Job Descriptions................................................................................................................ 53 B. Phased Build-Out Plan ...................................................................................................... 56 1. Project Vendors – Relationships & Hierarchy.................................................................. 56 2. Likely Phasing Scenario ................................................................................................... 58 3. Sample Project Schedule................................................................................................... 58 4. Wireless (Wi-Fi) Sample Project Schedule ...................................................................... 59 C. ISP Plan............................................................................................................................... 61 1. Internet-Only Scenario...................................................................................................... 61 2. ISP Service Plan Spreadsheet ........................................................................................... 61 D. Potential Third-Party Relationships ................................................................................ 62 VI. Resources ..................................................................65 VII. Addendum................................................................69 December 1, 2003 Lompoc Broadband Services Feasibility Study 3 Final Report Copyright © 2003 – McKibben Consulting – All Rights Reserved – Unauthorized Use Prohibited Section I - Executive Summary Of The Findings A. Is a High-Speed Broadband Network for Lompoc Even Feasible? It is technologically and economically feasible for the City of Lompoc to build, own and operate a state-of-the-art municipal utility broadband telecommunications system. A fiber optic broadband network offering television, high-speed Internet and telephone service, a wireless network offering mid-speed Internet service and a hybrid system combining the two would be technically sufficient and fiscally viable as independent enterprises. This assessment leads to the conclusion that it would be financially justified, economically advantageous and serve a public purpose for the City of Lompoc to continue developing a municipal broadband utility. B. Is There Enough Public Demand To Support Such A Network? Sufficient demand exists in the City of Lompoc for a competitive telecommunications system offering television, telephone and Internet services. Quantitative primary research conducted in Lompoc indicates that 61% of households would purchase some level of broadband service from the City, with 53% interested in television service, 33% in high-speed Internet service, 36% in local telephone service and 45% in long-distance telephone service. Qualitative primary research confirms this result, and secondary research indicates that cities elsewhere with similar pre-launch survey results surpassed those expectations once actual service began. C. What Do People Think About The City Providing These Services? Public opinion of City services in general, and a prospective City-owned broadband network in particular, is very positive. City utility services have an 88% positive public approval rating, with more than half of consumers surveyed describing their feelings as "very positive." The concept of a City-owned telecommunications network received an 81% positive public approval rating, with three-quarters of the positive respondents saying they "strongly" favored the idea. Wireless data service was well received, with 74% of December 1, 2003 Lompoc Broadband Services Feasibility Study 4 Final Report Copyright © 2003 – McKibben Consulting – All Rights Reserved – Unauthorized Use Prohibited those surveyed saying it would increase the likelihood of purchasing Internet service from the City. These strongly positive ratings were definitively confirmed during qualitative focus groups and one-on-one interviews, by both consumers and business people. Additionally,