Lompoc Broadband Utility Presentation to the Digital Cities 1 April 2005 Steve Blum Tellus Venture Associates steveblum@tellusventure.com +1-831-582-0700

Very satisfied with choices? The Situation TV High Speed Internet Phone Very satisfied with choices? 85 chs, local, no HDTV or DVR ? 16% Up to 1.5 mbps Full range of service 38% (phone) 27% (DSL) 300+ chs, inc. HDTV& DVR, no local 22% 300+ chs, HDTV& DVR, no local Although some upgrades were planned by incumbent service providers in Lompoc, none plan to invest in advanced technology.

Council asked staff: Can we do it ourselves? Tellus Venture Associates, McKibben Consulting hired for feasibility study Research and analysis conducted in 2003 Analysis based on four hard criteria: How much people are spending now, Which services do they want to buy today, Which technologies work now, Given all the characteristics of the Lompoc market, which business model works best. Setting benchmarks that reflected real-world experience elsewhere and verifiable demand and opinion in Lompoc allowed staff to evaluate feasibility with a cold, quantitative eye.

A business case for broadband can be made in Lompoc Capital funding required: $26.3 M Year 15 metrics: Annual revenue $11.7 M Operating profit $3.9 M Subscribers 10,400 Internal rate of return 5.3% A system offering television, telephone and high speed Internet service can deliver a superior and expandable level of service with a positive return on investment, by relying on a robust business case that can weather market risks.

Would offering one or two services be economically viable? Fiber: Internet Only Fiber: No Phone Capital funding required: $30.0 M Year 15 metrics: Annual revenue $2.4 M Operating profit ($0.3 M) Subscribers 5,700 Internal rate of return N/A Capital funding required: $28.3 M Year 15 metrics: Annual revenue $8.0 M Operating profit $1.5 M Subscribers 10,100 Internal rate of return (8.1%) Offering only Internet service via a fiber optic network would not be self-supporting; offering Internet and television service alone is possible.

What does wireless add? WiFi Only Fiber + WiFi Capital funding required: $1.2 M Year 15 metrics: Annual revenue $1.3 M Operating surplus $0.3 M Subscribers 5,100 Internal rate of return 12.2% Capital funding required: $26.7 M Year 15 metrics: Annual revenue $11.7 M Operating surplus $3.1 M Subscribers 10,400 Internal rate of return 5.8% Combining a rapid WiFi network deployment with the build out of a fiber optic system could provide the best of both worlds with little additional risk.

Is a High-Speed Broadband Network Feasible for Lompoc? Financially justified? √ Economically advantageous? Serve a public purpose? 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.

Current Status LompocConnect network is now being tested >100 Tropos access points, >20 Motorola Canopy backhauls, ProntoNetworks OSS Council has approved a price of $19.99/month One level of Internet access at launch Council & staff determining: Scope, timing, implementation plan; Financing strategy Combination of lease & internal loans Broadly-based popular demand led council and staff to focus on learning what all citizens wanted, both in terms of service and the proper role for the city to play. Staff responded with implementable proposals that relied on proven demand, services, technology and business models that can and do work today.

Contact: Stephen A Blum President Tellus Venture Associates steveblum@tellusventure.com +1-831-582-0700

Municipal & Private Broadband Utilities Planning • Development • Management Feasibility Studies • Financial Analysis • Market Assessment Fiber Optic • Wireless • Satellite Stephen A Blum President Tellus Venture Associates +1-831-582-0700 steveblum@tellusventure.com www.tellusventure.com 5100 Coe Avenue, Suite 186 • Seaside, California 93955 USA