Goals of the Study. City of Nixa Broadband Feasibility Study. Andrew Michael Cohill, Ph.D. President Design Nine, Inc. Thursday, August 28, 14

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1 City of Nixa Broadband Feasibility Study Andrew Michael Cohill, Ph.D. President Design Nine, Inc. 1 Goals of the Study Evaluate the results of the business and residential survey Evaluate the current and future bandwidth needs of Nixa residents and businesses Examine expected current and future expenditures on broadband services in the City Evaluate the appropriateness of the open access business model Examine the business proposal from SiFi and conduct an independent 25 year financial analysis 2

2 User Needs 78% of smartphone data accessed by WiFi Internet traffic has increased 8X in past 5 years By 2017, video will be 73% of all Internet traffic By 2015, wireless devices will use more Internet than computers New HD 4K TVs need 19 meg per channel Business Internet use grew 24% from 2010 to Megabits 37.5 Megabits 25 Megabits 12.5 Megabits Internet Use Megabits Internet access Nixa Missouri National Any Internet usage 83.0% 77.0% 77.0% Have access at home 83.0% 76.0% 77.0% Using wireless access outside the home 20.0% 18.0% 19.0% 3 Broadband is the road, not one of the trucks Communities a modern digital road system that will deliver many kinds of services, not just Internet $500,706,706 available for broadband in the city... over half a billion dollars Broadband is NOT a number. It means that your businesses have as much bandwidth as they need to compete in the global economy. Copyright Design Nine, Inc. All rights reserved 4

3 Broadband can support many services, not just voice, video, and data Internet TV Telephone Data backups Videoconferencing Distance learning Job training Work from home Business services Telemedicine Telehealth Economic development Energy management Broadband is green...much potential to reduce the carbon footprint of communities Copyright Design Nine, Inc. All rights reserved 5 Do the math for Nixa Households on dial-up Households with little broadband No Internet 4% 76% 20% Number of households 307 5,832 1,535 Typical monthly telecom cost Local phone: $25 Long distance: $25 TV $65 Dial up Internet: $20 Local phone: $25 Long distance: $25 TV $75 Broadband Internet: $45 Local phone: $25 Long distance: $25 TV $65 Total monthly cost $135 $170 $115 Total annual cost $1, $2, $1, year residential cost $14,918,256 $356,933,088 $63,540,720 Total 30 year telecom cost $500,706,706 6

4 Business Survey Results 45 businesses, about 8% response rate Response rate suggests high interest (normally would expect 3% to 4% 100% of respondents indicated Internet was very important to their business 27% of respondents are not at all satisfied and 52% are only somewhat satisfied with their current Internet service. Only 21% are satisfied or very satisfied. 71% of respondents want regular updates about the project 9 written comments, all in favor of the project 7 Residential Survey Results 690 residents, about 9% response rate--very high 12% of residents work full time from home, and 19% work part time from home. 12% indicated they need nights and weekends access from home to company networks. A total of 43% of residents are trying to conduct some business activities from home. 89% of residents indicated that Internet access from home was very important. A total of 98% indicated Internet access was somewhat important or very important. 15% of residents answered that they are not at all satisfied with their current provider. Another 48% indicated they were somewhat satisfied, with a total of 63% expressing some dissatisfaction with their current Internet provider. 75% of respondents want regular updates about the project 8

5 Residential Survey Results 79% likely or very likely to buy a 50 meg plan at $50/month 66% likely or very likely to buy a 100 meg plan at $60/ month 29% likely or very likely to buy a 1 Gig plan at $99/month 9 SiFi Proposal! SiFi builds a high performance Gigabit fiber network in the City Network is operated as open access, meaning private sector providers sell all services The City does not sell services and does not compete with the private sector The City collects revenue from the network and uses it to: Pay for operating expenses Make annual lease payments to SiFi for 25 years Replace equipment as it wears out At the end of 25 years, the City owns the assets 10

6 Financial analysis We developed a 25 year financial pro forma that estimates: SiFi capital expenditures of approximately $27 million Operating expenses, including staffing, legal, network operations, extended warranties, utilities, repairs, maintenance, and many other items Customer take rates Revenue from services sold by private sector providers Payments by the City to SiFi for 25 years Costs to repair/replace equipment every 7-10 years 11 Conclusions Open access will keep services in the private sector and the City will not compete with service providers. The City will need to contribute approximately $4 million in the first five years to cover expenses while customer take rate increases Survey suggests that a minimum of 50% of residents will buy service from the new network. Network starts in year one with only 20% take rate, and has 6 years to meet 50%--fiscally conservative If take rate grows faster, less City funds may be needed Network goes into the black in year six and stays there $8.6 million cash on hand in year twenty-five, plus ownership of $27 million network (original cost) IRR is 2.82% Construction can be completed in less than two years 12

7 Contact information Andrew Cohill Design Nine, Inc. Community technology news and information Updated daily and weekly 13