Broadband Feasibility Study Report CCG Consulting and Finley Engineering May 22, 2018

Project Goal To determine the financial feasibility of constructing a citywide fiber network to provide gigabit-capable broadband throughout the City.

The Feasibility Study Engineering design for citywide fiber Speed tests / bill analysis Financial business plans Risks and benefit analysis Written report.

Benefits of Broadband Expand customer choice Digital divide – provide affordable broadband for everybody Education Economic development Work-at-home economy Healthcare

Potential Risks TDS expanding download capabilities Reaction of TDS to competition 5G might bring wireless broadband Operational risks from entering a highly technical business Ability to market and sell

Consequences of Not Building Fiber Increasing prices Affordability / digital divide TDS monopoly / death of DSL

Network Design Build fiber past every resident and business. Includes some existing fiber Selected PON technology Neighborhood nodes Biggest issue is getting access to existing poles

Cost of the Network Buried Lowest Land & Buildings $ 0.4 M $ 0.4 M Operational Assets $ 0.3 M $ 0.3 M Customer CPE $ 0.3 M $ 0.3 M Fiber Electronics $ 1.7 M $ 1.7 M Drops $ 3.1 M $ 2.1 M Fiber $ 8.3 M $ 5.8 M Software $ 0.2 M $ 0.2 M Total $ 14.3 M $ 10.8 M

The Pole Issue Access to Empire Electric poles is much higher than industry average Burying the whole network equally as expensive Might be possible to bypass downtown poles in alleys

Business Models Considered Single Provider – the City is the ISP. Open Access – allows multiple ISPs access to the network.

Financial Results – Retail Scenario Funding with Bonds All-Buried. Bond of $19.3 M. With 50% penetration loses $19.6 M over 25 years. With lowest construction costs. Bond is $14.6 M. With 50% penetration rate loses $11.8 M over 25 years. Funding with Sales Taxes All-Buried. Sales Tax Bond of $15.9 M. With 50% penetration makes $9.4 M over 25 years. With lowest construction costs. Sales Tax Bond of $12.3 M. With 50% penetration rate makes $11.0 M over 25 years. Open Access. Loses about $15 M more than retail scenario

Open Access Scenario City has nearly the same network costs with only cost of customer CPE going to the ISP. Would be difficult to attract multiple ISPs to Cortez. Underperforms other scenarios by approximately $15 M over 25 years.

Digital Divide Scenario Would build fiber to every home. Would provide free minimal broadband, perhaps 5 Mbps download. With tax financing should slightly outperform the retail scenarios.

Key Findings of the Study Many customers getting slower data speeds than what they are purchasing Bills show pricing done by customer. Funding with traditional bonds doesn’t work Funding with sales tax or other tax can generate significant profits over time. Open access is not feasible Pole access is a huge issue

Recommended Next Steps Residential survey to understand market demand. More engineering work to quantify cheaper options for pole access Explore possibility of sales tax financing Consider the possibility of building to everybody Community education Understand the many steps required to build and operate a fiber business.

Contacts Doug Dawson, President, CCG Consulting blackbean2@ccgcomm.com (202) 255-7689 Chris Konechne, Finley Engineering ckonechne@finleyusa.com (507) 777-2255