1. Massachusetts Telecommunications Symposium Massachusetts Telecommunications Symposium Broadband’s Role in Economic Development Doris Kelley Business Development Manager, Black & Veatch 319.235.2095 319.504.9066 mobile kelleydj@bv.com

2. 07/26/04 Page - 2 Economic Development 1. Good highways? 2. Adequate water and sewer lines? 3. Utilities? 4. Railheads/port facilities? 5. Available land at reasonable prices? 6. Skilled work force? 7. Decent tax rates?

3. 07/26/04 Page - 3 Economic Development Then Congratulations. In The Economic Development Game… You Lose.

4. 07/26/04 Page - 4 Satisfying The Speed Need

5. 07/26/04 Page - 5 Primary Motivations n Stimulate Economic Development n Create Educational Advantages n Enhance Medical Services n Gain Competitive Advantage n Maintain & Grow Population Base n Provide new, valuable services to the community

6. 07/26/04 Page - 6 Case Study A Case Study on the Economic Benefits a Communication Based Utility Brings to the Community

7. 07/26/04 Page - 7 Economic Development Factor #1 - Good Highways n Interstate Highway: 1-380 n Federal and State Highways: n U.S.: 20, 63, 218 n Iowa: 21, 57, 58

8. 07/26/04 Page - 8 Economic Development Factor #2 - Adequate Water and Sewer Lines WaterlooCedar Falls Capacity (gpd)53,900,00025,000,000 Ave. Daily Use13,769,0004,000,000 Peak Daily Use28,780,00010,423,000 Sanitation Service Capacity (gpd)36,500,0007,680,000 Ave. Daily Use18,40,0005,000,000 Source: Cedar Valley Economic Development Corp.

9. 07/26/04 Page - 9 Economic Development Factor #3 - Utilities WaterlooCedar Falls Electric ServiceMid-American Energy Municipal Gas ServiceMid-American Energy Municipal

10. 07/26/04 Page - 10 Economic Development Factor #4 - Railheads/port facilities n Local Motor Carriers: 20 n Rail Service: n Chicago Central and Pacific Railroad n Iowa Northern Railway n Union Pacific Railroad n Airport: n Waterloo Municipal Airport n 3 Runways n Commercial Carriers Source: Cedar Valley Economic Development Corp

11. 07/26/04 Page - 11 Economic Development Factor #5 - Available Land at Reasonable Prices Industrial ParksAcresZoningTax RatePrice Cedar Falls Industrial & Technology Park 775Industrial & Office$36.56$35,000- 50,000 Midport America @ Waterloo Airport 2,000M-2 Industrial$41.78$30,000 Waterloo North East Industrial Park 240M-2 Heavy Industrial$41.78$25,000 Evansdale Technology Park 35Industrial$31.03$25,000 Source: Cedar Valley Economic Development Corp

12. 07/26/04 Page - 12 Economic Development Factor #5 - Available Land at Reasonable Prices Industrial ParksTax Increment Finance State Enterprise Zone Cedar Falls Industrial & Technology Park Yes Midport America @ Waterloo Airport Yes Waterloo North East Industrial Park Yes Evansdale Technology ParkYes Source: Cedar Valley Economic Development Corp

13. 07/26/04 Page - 13 Cedar Falls Industrial & Technology Park

14. 07/26/04 Page - 14 Economic Development Factor #5 - Available Land at Reasonable Prices n Median Selling Price: 2001 n Cedar Falls: $105,000 n Waterloo$72,000 n Average Home Sale Price: $99,649 Source: Waterloo/Cedar Falls Board of Realtors Housing

15. 07/26/04 Page - 15 Economic Development Factor #6 - Skilled Work Force Civilian Labor Population 20012000199919981997 67,40067,10069,60069,20068,700 Unemployment Rate 20012000199919981997 3.4%2.7%3.8%3.6% % of Total Employed 2001 Manufacturing14,30020% Service19,90027.7% Retail Trade13,10018.2% Government12,30017% Source: Iowa Work Force Development

16. 07/26/04 Page - 16 Economic Development Factor #6 - Skilled Work Force n Educational Attainment Levels n High School Graduate or Higher79% n Bachelor’s Degree21% Source: Cedar Valley Economic Development Corp.

17. 07/26/04 Page - 17 Economic Development Factor #7- Decent Tax Rates n Waterloo:$41.78 n Cedar Falls$36.55 n Sales Tax: 7% (State – 5%; Local 2%) Property Taxes (Per $1,000 of Taxable Value) Source: Black Hawk County Assessor

18. 07/26/04 Page - 18 Telecommunications Services n CLEC n McLeod USA n POPs n MCI - Located in Waterloo n AT&T- Located in Waterloo n Long Distance Carriers n MCI n AT&T n Sprint

19. 07/26/04 Page - 19 Major Private Employers CompanyEmployees John Deere*5,072 Covenant Medical Center*2,479 IBP, Inc.*2,230 Allen Memorial Hospital*1,400 Bertch Cabinet Mfg.*1,262 Omega Cabinet Ltd.*940 GMAC Mortgage Co.*899 Hy-Vee Food Stores851 Wal-Mart Stores760 APAC*600 * Waterloo Based

20. 07/26/04 Page - 20 Major Private Employers (Cont.) CompanyEmployees Viking Pump485 Super Target*350 Affina*331 Martin Brothers330 VGM & Associates*300 Western Home278 Doerfer Engineering265 John Deere Community Credit Union221 Principal Financial221 * Waterloo Based

21. 07/26/04 Page - 21 Primary Motivations n Stimulate Economic Development n Create Educational Advantages n Enhance Medical Services n Gain Competitive Advantage n Maintain & Grow Population Base n Provide new, valuable services to the community

22. 07/26/04 Page - 22 Stimulate Economic Development n # of Businesses n Cedar Falls Industrial Park & Prairie Technology Park125 n Midport America @ Waterloo Airport4 n Evansdale Technology Park1 n Waterloo North East Industrial Park5

23. 07/26/04 Page - 23 Target Corporation Distribution Center n Largest sq. ft. Iowa Project in the last 15 Years n 1,350,000 sq. ft. n $40M Building n $60M in M/E n 900 Full-time & 200 Part-time Employees n $25M Annual Payroll n Fun Facts: n 33 Acres Under Roof n 1 ½ Miles of Trench Footings, enough Concrete for 25 Miles of 2-lane Highway n Building can hold 90,000 Mini Vans

24. 07/26/04 Page - 24 New Construction Valuation Cedar FallsWaterloo 1996$32M$58M 2001$65M$76M 2002$101M$53M Fiscal Year July thru June

25. 07/26/04 Page - 25 Cedar Falls Building Value: $96 Million and Counting n $100 Million in New Construction this Fiscal Year is a Distinct Possibility n “The Biggest thing During the Year was The Target Distribution Center; That Bumped Us Up Pretty Good.” Waterloo Cedar Falls Courier, June 10, 2002

26. 07/26/04 Page - 26 C.F. Building Hits Record $100 Million n “Cedar Falls Set a Cedar Valley Construction Record this Fiscal Year, Topping Out at More than $101 Million.” n “Despite a Downturn in the National Economy, The City Blew Away all Existing Records in the Fiscal Year Ending June 30.” Waterloo Cedar Falls Courier, July 12, 2002

27. 07/26/04 Page - 27 C.F. Building Hits Record $100 Million n “…Meanwhile, the city of Waterloo failed to escape the stalled economy. Suffering from declining commercial permits and no large industrial projects to boost the value, the city recorded less than $53 million in construction during the last fiscal year --- its lowest total in eight years.” Waterloo Cedar Falls Courier, July 12, 2002

28. 07/26/04 Page - 28 n Cedar Falls n Growth has been a Mix of Residential, Commercial, Corporate Office, and Industrial n Waterloo n Growth has been a Mix of Residential (25%) and Commercial/Retail (75%)

29. 07/26/04 Page - 29 Located Adjacent to the City of Waterloo, Cedar Falls’ Assessed Valuation has Increased at an Average Annual Rate of 7.4% over the Last Five Years, Despite State-Mandated Rollbacks in Residential Property and Machine and Equipment Assessment Rates. Moody’s Expects the Tax Base to Continue Showing Strong Growth due to Ongoing Residential and Industrial Development Projects. Moody’s Investors Service Municipal Credit Research New Issue Published 3 Dec 2001

30. 07/26/04 Page - 30 Competitive Advantages n “Fiber Optics is the Key to Waterloo’s Future Growth,” (Mayor) Rooff said. “In Order for Waterloo with its Businesses to Move into the 21 st Century, We Need Fiber Optic Capability.” n “I Believe it has Hurt Us Economically not to be able to Provide Fiber Optics to Businesses Locating in our City.” Waterloo Cedar Falls Courier, August 21, 2001

31. 07/26/04 Page - 31 Competitive Advantages Waterloo Refocuses on Attracting Jobs The vast majority of new industries moving to the Cedar Valley are locating in the Cedar Falls Industrial Park, which has caused some discontent from local business leaders and residents wondering why Waterloo is falling short. While officials note any jobs created in Waterloo-Cedar Falls benefit the entire area, Waterloo needs industrial development to boost its tax base. Waterloo Cedar Falls Courier, Headline News, March 11, 2002

32. 07/26/04 Page - 32 Competitive Advantages Plans for City’s Fiber-Optic System Hits Speed Bump Excite@Home’sExcite@Home’s bankruptcy threw wrench in plans. Six months after being promised high-speed Internet access by the local cable provider, businesses in some areas of the city are still using either slower or more expensive alternatives. “What Internet access?” said Joe Burum,CEO of Waterloo Tent & Tarp. “It frustrates me that we have to use a second-tier DSL service that slows the process.” Waterloo Cedar Falls Courier, April 3, 2002

33. 07/26/04 Page - 33 Competitive Advantages Qwest to Offer DSL Service in Waterloo “DSL Service is a Cutting-edge Technology and We’re Very Pleased to Bring it to Waterloo,” Said Max Phillips, Vice President of Policy and Law for Qwest in Iowa. Waterloo Cedar Falls Courier, Headline News, April 25, 2002

34. 07/26/04 Page - 34 Competitive Advantages n Team Technologies n Principal Financial n Hawkeye Community Business Center n Crystal Distribution Relocations & Expansions in Cedar Valley Since 1996

35. 07/26/04 Page - 35 Educational Advantages n Waterloo has 21 Buildings n ICN Feeds to ICN Rooms in 3 Buildings – Used for Distance Learning n Buildings are Connected to the Administration Building via a Frame Relay. All Buildings, Plus Administration have a T1 Connection n Mediacom has Agreed to Connect all 21 Buildings via Fiber n School District is Lacking the Capability of Multi Media, Streaming Video in 18 Buildings n Fiber Connection will Result in an Annual Savings of Approximately $100,000.00, Plus Costs for Equipment Support Waterloo Community Schools

36. 07/26/04 Page - 36 Educational Advantages n Five Major Routes and Five Secondary Routes of Fiber Optic Transmission Line Link the City’s 10 School Buildings, Administrative Center, Central Services and Area Education Agency 7 n Internet Service Provided Thru AEA 7 at No Cost n AEA 7 has a Fractional DS3 n Fiber Connection Eliminates the Need for T1s Cedar Falls Community Schools

37. 07/26/04 Page - 37 Educational Advantages n Cedar Falls Community Schools Received $1 M from the State Of Iowa to Provide Streaming Video On Demand to all School Buildings. All Classrooms will have Access to Distance Learning. n Pursuing the Opportunity of Students Accessing Streaming Video via a Home Connection using Cedar Falls’ Community-wide Telecommunications Network. 21 st Century Learning Infrastructure

38. 07/26/04 Page - 38 Medical Advantages n Hospitals n Covenant Medical Center n Allen Memorial n Sartori

39. 07/26/04 Page - 39 To Increase & Maintain Population Population 19902002Increase Cedar Falls24,29836,1455.3% Waterloo66,46768,7473.4% Black Hawk123,798128,0123.4%

40. 07/26/04 Page - 40 The Winning Advantage “What’s The Difference?”

41. 07/26/04 Page - 41 Cedar Falls, Iowa Developed a Municipally Owned and Operated Telecommunications Network Waterloo, Iowa Depended on Existing Providers to Meet Current and Future Needs

42. 07/26/04 Page - 42 Telecommunications Services n Municipal City-Wide Fiber Optic Network n High-speed Fiber Connection n Dedicated Connection to the Internet n Cable Modems n FTTB n T1 through DS3 Level Service Cedar Falls Industrial Park & Prairie Technology Park

43. 07/26/04 Page - 43 Cedar Falls, Iowa 2003/2004 Data

44. 07/26/04 Page - 44 Business Growth n Cedar Falls Industrial Park & Prairie Technology Park n Number of Businesses 140 n Number of Employees4,250 n Buildings – Sq. Footage4.1M

45. 07/26/04 Page - 45 Major New Business Projects n PIPAC Centre On The Lake n Hamilton College n Performance Bodies n Crystal Distribution (expansion) n Wingate Inn (under construction) n Mudd Video Production Center (Fall 2004)

46. 07/26/04 Page - 46 Data Center & Carrier Hotel Team Technologies LLC n 12,000 Square Foot Data Center and Carrier Hotel n Feature World-Class Security n Power and Environmental Control Systems Specifically Designed for IT and Telecom Services n 50-Mile Fiber Optics MAN n Extending the Network to Chicago, Des Moines and Internet National Access Points

47. 07/26/04 Page - 47 New Construction Value n 2003: $80 Million n 2004: $92 Million Fiscal Year July thru June

48. 07/26/04 Page - 48 Increase in Land Value n Increase in Price Per Acre n From $35,000 to $50,000 n To $35,000 to $70,000 n Increase in Property Tax n From $36.55 to $36.95 for FY 2005

49. 07/26/04 Page - 49 Moody’s Investors Service n “Moody’s Upgrades to A1 from A2 the Rating on the City of Cedar Falls’ (IA) Sewer Revenue Bonds, Affecting $5.1 Million of Outstanding Parity Debt, Including Current Issue. Sound Financial Operations Providing Ample Liquidity and Favorable Coverage Ratios.” February 3, 2004

50. 07/26/04 Page - 50 Industrial & Technology Park Develop Into a City Within a City n “The City of Cedar Falls is Extremely Pleased with our Strong Continued Economic Development Growth that has Exceeded our Expectations. We Continue to Expand our Industrial & Technology Park while Maintaining our Focus on Quality Development and Job Creation,” Said Bob Seymour, Cedar Falls Community Services Manager. “The Cedar Falls Industrial & Technology Park has Basically Developed into a City Within a City.”

51. 07/26/04 Page - 51 Lasting Effects n Commerce n Politics n Philosophy n Art n Education

52. 07/26/04 Page - 52 Information Revolution “(Communities) that Harness its Power and the Opportunities it Presents will Stand Tall as Great Powers and those that do not will Shrink in Every Aspect of Civilization.” Michael K. Powell Chairman, Federal Communications Commission

53. Massachusetts Telecommunications Symposium Massachusetts Telecommunications Symposium Small Cable System Thrives Shrewsbury Electric and Cable Operations Thomas Josie July 26, 2004

54. 07/26/04 Page - 54 Conclusion n Municipal entities can successfully build/own/operate “State of the Art Broadband System” n Rates and services are competitive with industry n Financial return to Town, ancillary benefits, and Municipal Fiber Network surpasses alternatives. * (SELCO is an incumbent operator without competition)

55. 07/26/04 Page - 55 What We Offer n Traditional Analog & Digital Cable Services n HD TV n Personal Video Remote (PVR) Services n Video On Demand n Broadband Internet - Residential/Business Services n Municipal Fiber Network

56. 07/26/04 Page - 56 n Phones, Voice Mail – For Town Government, Schools, SELCO n Internet Service – Town Government, Schools n Data Network – All Municipal Buildings n Video Between Buildings n PEG use for Remote Shoots n Public Safety - Radio Repeaters Municipal Fiber Network

57. 07/26/04 Page - 57 Value Added to Community n Lower Rates for Video Services  Customers Save $2M Annually n Local Control  Excellent Relationship with Issuing Authority n Financial Benefits to Town  5% of all Revenue (Including Internet)  3% for Public, Education, Government Access

58. 07/26/04 Page - 58 Value Added to Community n Superior Customer Service  One-Stop Shopping - Offices in the Town Hall n Municipal Fiber Network  Joint Operating Committee Town, School, SELCO n Town Website  www.Shrewsbury-MA.gov

59. 07/26/04 Page - 59 Keys to Success n Apply business/investment principles n Know Your Market – Keep it Local n Offer Competitive Services – Technology & Price n Integrate with Community – Schools, PEG Access, Local Businesses, Town Government n Customer Service – Keep Control! n Use Proven Technology

60. 07/26/04 Page - 60 Vitals Homes Passed13,900 Basic Subs11,870 (85% Penetration) Internet Customers5,735 (41% Penetration) Miles of Plant190 mi System ArchitectureHFC 860 MHZ 250 Homes/Node Annual Revenue (2003)$7.6 M

61. 07/26/04 Page - 61 Vitals - Rates Expanded Basic (72 ch.)$30.55* Digital, Expanded Basic Converter, VOD, Music, PPV (153+ ch.) $42.50* Premium (HBO)$10.95* *No extra Taxes or Fees

62. 07/26/04 Page - 62 Policy to Ponder Who Should Control Essential Municipal Infrastructure? -Thanks for Listening

63. Massachusetts Telecommunications Symposium Massachusetts Telecommunications Symposium Moving The Complex To The Understandable John Reynolds Integrated Architectures July 26, 2004

64. 07/26/04 Page - 64 Thoughts For The Day n Subscriber services drive all revenues. n Service providers are key to success. n Municipal networks’ customers are service providers. n Low costs and high volumes are the goal. n The success lies in flow-through automation.

65. 07/26/04 Page - 65 A Subscriber’s Simple Needs n Crystal clear telephone calls n Crisp video reception that does not blotch n Responsive interactive access to the Web n Bulk delivery of large content with no disruption of other services

66. 07/26/04 Page - 66 Sample Services List n Voice: n Number portability n Emergency services n Directory assistance n Operator assistance n Caller ID n Data: n High speed Internet n Variable bandwidth n Differentiated services n Wireless hotspots w/roaming n VPN privacy n Security controls n Environmental controls n Meter reading n Video n Cable n Local n Satellite n Video on Demand n Virtual DVD n Personal videoconferencing n Radio n Streaming channels n Music on demand n iTunes n User-provided services n Content n Application portal

67. 07/26/04 Page - 67 Service Providers: Wholesale Partners The Metropolitan Network Subscribers Network Operator Service Providers Orders, Service Calls, Retail Billing Activations, Network Status, & Wholesale Billing

68. 07/26/04 Page - 68 Access Paths to a Subscriber Network Operator Service Provider Service Provider Service Provider Internet PSTN Satellite Subscriber PC TV Telephone The network operator must control the activation of paths from all the service providers’ border gateways to the subscriber’s edge. Subscriber’s Edge Service Provider’s Border Gateway

69. 07/26/04 Page - 69 Key Network Operator OSS Processes n Service Creation n Service Provider Acquisition n Service Activation n Service Registration n Service Assurance n Billing

70. 07/26/04 Page - 70 Network Operator’s Provisioning Office Service Creation Service Management System Service Catalog Application Administrator Applications administrators enter access service definitions into the service catalog and advertise the features.

71. 07/26/04 Page - 71 Service Provider Acquisition Network Operator’s Provisioning Office PRM Service Catalog Service Provider’s Provisioning Office After acquiring a new service provider, the network operator administrator enters the contract parameters into the partner relationship management database.

72. 07/26/04 Page - 72 Service Provisioning and Activation Network Operator’s Provisioning Office Service Provider’s Provisioning Office Provisioning Order Entry Retail Billing Wholesale Billing Configuration Activation PRM Service Catalog Larger service providers will all want “flow through” activation for service paths to new subscribers. This provides a dramatically lower unit cost and eliminates human transcription errors. Clearing House

73. 07/26/04 Page - 73 Service Registration Network Operator’s Provisioning Office Subscriber’s Premises Network Edge Activation Wholesale Billing Access Device Phone PC TV When an access device comes online, it registers with the “network edge” for access. The network edge checks with the real-time configuration policy manager database for access authorization. Community Access Network Wholesale Billing Configuration PRM Service Catalog

74. 07/26/04 Page - 74 Service Assurance Network Operator’s Network Operations Center Service Provider’s Network Operations Center Service Provider Gateway Surveillance Service providers will want to have major alarms routed through to their surveillance systems. Trouble Management Trouble Management Community Network Subscriber Edge Device Clearing House

75. 07/26/04 Page - 75 Billing Network Operator’s Billing Center Service Provider’s Billing Center Subscriber Retail Billing Wholesale Billing Network operator bills service provider for access lease in advance. Service provider bills subscriber for services. Any usage-based revenue sharing is distributed in arrears. Wholesale Billing Configuration PRM Service Catalog Clearing House

76. 07/26/04 Page - 76 The Big Picture Support Centers CALEA Cust Care Fiber Municipal Operations Head End Medical Center Operations University Operations RF Fiber PSTN Internet QoS VPN Policy Center Clearing House Access Billing Retail Billing TAC Op Svcs Dir Assist LIDB CNAM Feature Server E911 PSAP Content Providers Service Providers ISP Radio SP Content SP TV SP HVAC SP Security SP Electric SP Voice SP Application Providers LECs TNs, port Provis- ioning Dispatch Subscriber Devices Edge Devices Border Gateways

77. 07/26/04 Page - 77 The Larger Context Service Provider Inter- Exchange Provider Network Operator Clearing House Network Operator Subscribers Your Community Another Community Applications Content Service Provider

78. 07/26/04 Page - 78 Opportunities for Outsourcing n Network Operators n Technical Assistance Center n Flow-through activation n Dispatch n Wholesale (access) billing n Revenue sharing distributions n Roaming and settlement n Service Providers n Full OSS system, or: n Customer care n Interface to support providers n Activation gateway n TAC center n Retail billing n Access mediation gateway n Revenue sharing and roaming settlements

79. 07/26/04 Page - 79 Summary n Service provider’s financial viability will be through the delivery of differentiated services. n Everyone’s margins depend on automation of the high volume transactions. n Network operators will expand their revenues by acquiring an optimal number of service providers. n There are many opportunities emerging to reduce costs and complexity through outsourcing selected OSS operations. n The systems integration can be somewhat complex, but you don’t have to do it all yourself.