City of Seattle Fiber-to-the-Premises Feasibility Study Prepared for City of Seattle June 2015 CTC Report | City of Seattle| June 2015 Contents 1 Executive Summary ................................................................................................................. 1 1.1 Background and Objectives .............................................................................................. 2 1.2 Focus of This Analysis ....................................................................................................... 3 1.3 Market Assessment .......................................................................................................... 4 1.4 Survey Results .................................................................................................................. 5 1.5 Redefining Open Access ................................................................................................... 8 1.5.1 Open Access Goals .................................................................................................... 9 1.5.2 Evolving Over-the-Top Providers ............................................................................ 10 1.6 Changes to the Competitive Landscape ......................................................................... 12 1.6.1 Comcast ................................................................................................................... 13 1.6.2 CenturyLink ............................................................................................................. 13 1.6.3 Wave ....................................................................................................................... 13 1.6.4 Multi-Dwelling Unit Providers ................................................................................ 13 1.7 Recommendations ......................................................................................................... 14 1.7.1 Retain Ownership of Assets .................................................................................... 14 1.7.2 Develop an Application Demonstration Center ...................................................... 15 1.7.3 Develop a Focused Pilot Project ............................................................................. 15 1.7.4 Work with SCL as a Partner ..................................................................................... 17 1.7.5 Continue to Support City Connectivity Needs ........................................................ 18 1.7.6 Potential Public-Private Partnerships ..................................................................... 19 2 Understand the Financial Forecast Models, Assumptions and Sensitivities ........................ 20 2.1 Financial Models............................................................................................................. 21 2.2 Base Take Rate and Pricing Assumptions ....................................................................... 21 2.3 Price and Take Rate Fluctuation Scenarios .................................................................... 23 2.3.1 Fully Subscriber-Funded Model (GO Bond Financed) with Construction in SCL Power Space 23 2.3.2 Property Tax Funded Utility Model with Construction in SCL Power Space .......... 29 2.4 Scenarios Based on Residential Willingness to Switch Providers .................................. 32 3 Influences on the City’s FTTP Model ..................................................................................... 37 ii CTC Report | City of Seattle| June 2015 3.1 Strengths, Weaknesses, Opportunities, Threats (SWOT) .............................................. 37 3.1.1 Strengths ................................................................................................................. 37 3.1.2 Weaknesses ............................................................................................................ 37 3.1.3 Opportunities .......................................................................................................... 38 3.1.4 Threats .................................................................................................................... 39 3.1.5 SWOT Conclusion .................................................................................................... 39 3.2 Market Forces ................................................................................................................ 40 4 Evolution of the Market ........................................................................................................ 48 4.1 Partnerships ................................................................................................................... 48 4.1.1 Google Fiber ............................................................................................................ 49 4.1.2 Alternative ISPs ....................................................................................................... 49 4.1.3 Seattle City Light ..................................................................................................... 50 4.2 Municipal Retail Model Considerations ......................................................................... 50 4.2.1 Take Rate................................................................................................................. 51 4.2.2 Multi-Dwelling Units (MDUs) .................................................................................. 52 4.2.3 Ubiquitous Access ................................................................................................... 54 4.3 Services ........................................................................................................................... 54 4.4 Funding Mechanisms ..................................................................................................... 55 4.4.1 General Obligation Bonds ....................................................................................... 55 4.4.2 Revenue Bonds ....................................................................................................... 56 4.4.3 Property Tax Funded Utility Model......................................................................... 56 5 Competitive Assessment ....................................................................................................... 57 5.1 Residential and Small Business Services ........................................................................ 57 5.1.1 Cable ....................................................................................................................... 58 5.1.2 DSL........................................................................................................................... 58 5.1.3 FTTH ........................................................................................................................ 59 5.1.4 Satellite ................................................................................................................... 59 5.1.5 Wireless ................................................................................................................... 60 5.2 Enterprise Market .......................................................................................................... 61 iii CTC Report | City of Seattle| June 2015 5.2.1 Dark Fiber Services .................................................................................................. 61 5.2.2 Ethernet Services .................................................................................................... 65 5.3 MDU Providers ............................................................................................................... 68 6 FTTP Design and Cost Estimates ........................................................................................... 69 6.1 Aerial Construction Approaches — Communications Space vs. Power Space .............. 73 6.1.1 Power Space ............................................................................................................ 74 6.1.2 Communications Space ........................................................................................... 75 6.2 Cost Estimates ................................................................................................................ 76 6.3 Methodology for Developing OSP Route Assumptions ................................................. 79 6.4 Backbone Routes ............................................................................................................ 85 6.5 Network Architecture and Electronics ........................................................................... 88 6.5.1 Core Network Sites ................................................................................................. 90 6.5.2 Distribution and Access Network Design ................................................................ 94 6.6 Operations and Maintenance Cost Estimates .............................................................. 101 6.6.1 Subscriber Provisioning ......................................................................................... 101 6.6.2 Maintenance ......................................................................................................... 101 7 Survey Results ..................................................................................................................... 103 7.1 Residential Survey ........................................................................................................ 103 7.1.1 Survey