1 Hometown Advantage “Keeping Your Money in Your Community Working for You! Borough of Kutztown, FTTH Project American Public Power Association Municipal Broadband & Economic Development 1539 Longworth House Office Building Washington, DC September 25, 2003 Jaymes Vettraino, Manager 45 Railroad Street Kutztown PA * (f)

2 Borough of Kutztown, PA Population: 5067 Total Budget:$17 million Size: 1.5 square miles Households: 2200 Rental properties:45% Student Residents:1800 Median Age:24.5 (2000 U.S. Census Bureau) Median Income:$49,653 (2000 U.S. Census Bureau) Kutztown University (enrollment of 8000+) located on western boarder Approximately twenty (20) miles from the Cities of Allentown and Reading, PA Low taxes relative to the surrounding communities

3 “Providing Utilities and Communications Services To Your Community” Electrical Utility Sewer Treatment Water Distribution Telecommunications Voice, Video and Data Police Services Planning and Zoning Parks and Recreation Opportunities Highway Maintenance Refuse/Recycling Collection Railroad Management Services Provided by Kutztown

4 First Look at Fiber: Improve current municipal services: Supervisory Control and Data Acquisition System (SCADA) Automated Meter Reading (AMR) 1999 successfully implemented first “fiber loop” to municipal properties

5 Initial Fiber Loop

6 Fiber to the Home (FTTH) Objectives Enhance current municipal services Bring broadband technology to our community Create opportunities for Economic Development Control our own destiny in the “knowledge based economy” Complimentary function to our Electric Service (grow an existing asset) Diversify the Borough’s operations Reduce telecommunication costs for residents

7 Why FTTH? Leverage experience and knowledge of Borough’s electrical linemen Fiber optic experience with the original SCADA system Reliable, low maintenance technology “Turn-on” and “turn-off” without visiting the properties Make available “point-to-point” connections within the Borough Provide enough bandwidth for future applications

8 Plan #1 “Be the Turnpike” 1.The Borough would build a FTTH network to reach every home and business. 2.The Borough would then lease parts of the system to private service providers to deliver content to customers. The Borough was looking for partners for: Design and Build the system Cable Television Telephone Internet Security AMR RFP #1: December 11, 2000 Only successful one partner was found: Design and Build

9 Plan #2 “Commit to three (3) services, fill-in the gaps with municipally built content if necessary” RFP #2: April 9, 2002 Partners found: Design and Build :Atlantic Engineering Cable Television: None: Needed to build television headend Telephone: D&E Communications (June 2002) Internet (www access):Adephia Solutions (backbone access only) Internet: DJazzed ( user support)

10 System Construction Access to the World Wide Web Adelphia Solutions Cable Television Headend Net Work Operating Center Telephone Dial Tone 6 Main Fiber Feeds to the Town 4 Wire Fiber Drop to the Home

11 Financing the Project $2,185,000 from a 30 year taxable bond issue $2,935,960 loan from the Borough Electric Fund $710,000 budgeted in 2003, from cash on hand Total Borough Properties passed:2200 (all) Total Residential Units Installed:570 Total Multi-Dwelling Units Installed:104 Ready to Serve Connections:1036* Ready to Serve Services:3690* * At this time, each residential unit can provide three services and each MDU can provide 12 services. This number will continue to expand as the Borough offers more services over the FTTH system.

12 Pricing Basic 32 Channel System$15.00 Expanded 101 Channel System$29.75 Premium 1 Television 7 channels$15.00 Premium 2 Television 7 channels$15.00 Television Internet 64K128K256K512K768K1Mb $15$20$25$30$35$40 Upload Speed 1Mb Download for all Discounts for multiple Services Incumbent cable provider prices (70 channels): Before Municipal project:$33.63 After Municipal project:$26.82

13 One Year Report In August, 2003 the Borough of Kutztown released the first “Hometown Utilicom (HU) Annual Report,” findings from that report: Meeting revenue expectations System reliability has exceeded expectations Exceeding first year customer projections Able to maintain the system independently ahead of schedule Total estimated community wide savings on cable television is $200,000 from August August 2003* * $200,000 represents savings generated by both HU customers and the savings realized by customers who stayed with the incumbent service provider

14 Customer Growth 1.8 Services per customerCurrent penetration rate: 27% (13 months)

15 Press for HU

16 Aggressive competition from incumbent service providers Pressure from incumbents on state and local politicians SCADA monitoring and security of critical public utilities. Awarded the 2003 Pennsylvania Governor’s Award for Local Excellence Meeting or exceeding first year’s projections Aggressive competition from incumbent service provides (reduced prices for residents) Bridging the “digital divide” No longer reliant on private companies for economic development “Open access” for future multiple service providers to enter a market, there by increasing competition and reducing price. Providing multiple service with one wire (less infrastructure). ChallengesAccomplishments

17 Private Partners and Suppliers Contributing to the National, State and Local Economy Engineering:Atlantic Engineering Software and Hardware for FTTH:Optical Solutions, Inc. Fiber Optic Cable and Connectors:Corning, Inc., Fiberone, Inc. and others External Batteries:Alpha Technologies, Inc. Cable Television Content: National Cable Television Cooperative, Inc. Telephone: D&E Communications Internet: Adephia Solutions and DJazzed Automated Meter Reading:TWACS by Distribution Control Systems, Inc. Security:Local Company (soon to be announced) Gaming Over the Internet:Local Company (beta-testing) Household Wiring:Local Electricians Computer Components:Local Computer Suppliers It would be impossible for Kutztown to design, build and maintain our FTTH services without the support and innovation of our private sector partners

18 “In the 21 st century knowledge economy, fiber optic communications systems will be as important as any other public utilities in determining the economic viability of a community. The Borough of Kutztown has decided to take responsibility for its own economic future.” – Eric Ely, Borough Council President

19 Hometown Advantage “Keeping Your Money in Your Community Working for You! Borough of Kutztown, FTTH Project American Public Power Association Municipal Broadband & Economic Development 1539 Longworth House Office Building Washington, DC September 25, 2003 Jaymes Vettraino, Manager 45 Railroad Street Kutztown PA * (f)