Accessibility Statement City of Lakeland Broadband Business Plan - - PowerPoint PPT Presentation

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DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND City of Lakeland Broadband Business Plan Presentation to City Council August 5, 2019

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Broadband Business Plan Project Timeline Governance Cost Estimates Final Business Plan Options to structure a Cost estimation, Council broadband enterprise funding and financial Presentation of and how it would results for building and the Most Feasible operate within the City operating a broadband Options for organization enterprise Deployment Apr 2019 August 5th Feb 2019 Mar 2019 July 10th July 22nd Project Kick-Off Market Research Business Strategy Project ramp-up, Residential & Deployment Options goal-setting, business surveys, Financial Plans milestones and market dynamics Operations & Staffing Plans project plan and competitive environment

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Deployment Options Fiberhoods Citywide Citywide + County 1 2 3 Service available to Service available to Service available based homes and businesses in homes and businesses in on number of customers the City limits the City limits and that sign-up in each area County • 3-7 Years • 3-5 Years • 3-5 Years • Up to 112,000 Homes • Up to 20,000 Homes • Up to 44,000 Homes & Businesses & Businesses & Businesses 1

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Key Assumptions in Each Option • FIOS overbuild is optional in all models • Triple-play services offered in all models • 38% residential take rate, 41% commercial take rate • Year 1: Engineering, funding, organizational structure, key hires • Year 2: Construction, building operations, main hiring • End of Year 2: First services available • Years 3 – Beyond: Additional construction phases, operational scaling • Standard pricing based on market research • O&M costs estimated with annual escalators • Staffing costs using industry standard rates, plus a 35% overhead (Lakeland’s rate) • Renewal and replacement – 7, 10, 20 and 25 year cycles based on asset lifetime • Financing: 20 year, annual payment of P&I, 4% rate, 1% cost of issue • Reserves: Operating reserves set as a percent of revenue 2

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Key Assumptions in Each Option Operations Insource Outsource ✓ General Management ✓ Engineering ✓ Project & Construction Management ✓ Call Center ✓ Customer Service ✓ Billing ✓ Finance & Accounting ✓ ✓ Sales & Marketing ✓ Plant & Equipment Maintenance ✓ Warehousing & Inventory Management ✓ Customer Installations 3

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Services & Pricing (38% Expected Take Rate, Triple-Play Services ) Services Monthly Price Internet Only $19.99 25 Megabit $49.99 200 Megabit $59.99 400 Megabit $99.99 1 Gigabit $74.99 Double-Play Value (200 Megabit Internet + Basic Television) $134.99 Double-Play Preferred (400 Megabit Internet + Expanded Digital Favorites Television) $164.99 Double-Play Premium (1 Gigabit Internet + Premium Television) $119.99 Triple-Play Value (200 Megabit Internet + Basic Television + Home Phone) $174.99 Triple-Play Standard (400 Megabit Internet + Expanded Digital Favorites Television + Home Phone) $199.99 Triple-Play Premium (1 Gigabit Internet + Premium Television + Home Phone) Excludes taxes & fees. Taxes and fees for City broadband services will be at the same levels as what the competition passes through to customers today 4

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Financial Results – Comparing the Three Options (38% Expected Take Rate, Triple-Play Services ) Within the Within the City City Entire Service (No FIOS) (With FIOS) Area Financial Metrics Fiberhoods Total Investment $51,257,896 $89,500,000 $96,844,759 $226,556,691 Revenues Exceed Expenses 4-7 Years 4-6 Years 4-7 Years 9-10 Years Annual New Revenue to the City $1,500,000 $6,700,000 $10,500,000 $18,900,000 5

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Sensitivity Analysis – Take Rate Adjustments Sentitivity Analysis Impact of Take Rates on Annual Revenues Fiberhoods Within the City Entire Service Area $30 $25 Revenue in Millions $20 $15 $10 $5 $0 -$5 Take Rate -$10 20% 25% 30% 35% 38% 40% 45% 50% Fiberhoods $(4.20) $(3.00) $(1.85) $(0.67) $1.50 $1.80 $2.69 $3.10 Within the City $(3.30) $(1.20) $1.90 $4.60 $6.70 $7.20 $9.90 $12.60 Entire Service Area $(7.80) $(3.60) $5.40 $16.40 $19.60 $21.70 $24.30 $26.10 6

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Sensitivity Analysis – Price Adjustment Sentitivity Analysis Impact of Price Changes on Annual Revenue Fiberhoods Within the City Entire Service Area $50 $40 Annual Revenue in Millions $30 $20 $10 $0 -$10 Pricing Increase/Decrease -$20 -30% -20% -10% 0% 10% 20% 30% Fiberhoods $(3.0) $(2.2) $(0.8) $1.5 $2.1 $3.5 $4.9 Within the City $(2.5) $- $3.7 $6.7 $9.2 $11.9 $14.7 Entire Service Area $(15.8) $(7.4) $1.8 $19.6 $25.5 $33.1 $43.1 7

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Financial Results – Other Options To Consider • Could the City offer other options? 1. Internet and phone only, no television 2. Aggressively priced gigabit internet and phone only • Why? • Some communities provide only internet and phone without television • Pros: less complex, lower operational costs • Cons: lower take rates, incomplete packages • Another alternative • Some communities provide low priced gigabit internet and phone • Pros: drives higher take rates, promotes digital equity • Cons: Higher take rates must offset lower prices to be sustainable 8

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Financial Results – Other Options Within the City Internet & Voice Gigabit Founding (No FIOS) Only Member Financial Metrics ORIGINAL (No Television) (Longmont Model) Expected Take Rate 38.07% 30% 60% Total Investment $89,500,000 $95,000,000 $95,000,000 Revenues Exceed Expenses 4-6 Years 4-7 Years 8-9 Years Annual New Revenue to the City $13,000,000 $5,500,000 $5,500,000 9

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Financial Results – Comparing the Three Options (38% Expected Take Rate) Within the City Within the City Entire Service Investment Category Fiberhoods (No FIOS) (Adding FIOS) Area 20,000 Homes & 44,000 Homes & 96,000 Homes & 35,000 Homes & Service Area Businesses Businesses Businesses Businesses Fiber Feeder/Distribution $25,961,711 $135,030,623 $47,440,153 $53,308,812 Fiber Service Drops $5,213,824 $42,781,288 $14,607,806 $14,607,806 Equipment & Implementation $5,281,300 $23,944,780 $10,400,980 $10,877,080 Building Improvements $550,000 $800,000 $800,000 $800,000 Total Capital Costs $37,006,835 $202,556,691 $73,248,939 $79,593,698 Working Capital $14,251,061 $24,000,000 $16,251,061 $17,251,061 Total Investment Required $51,257,896 $89,500,000 $96,844,759 $226,556,691 10

DRAFT INFORMATION ONLY CONFIDENTIAL & PROPRIETARY PROPERTY OF THE CITY OF LAKELAND Simple Implementation Roadmap (Sample Only) Phase 1 Phase 2 Future Phase Construction Construction Construction Begins Begins Oct 2021 2026-2027 Oct 2019 Oct 2020 2022-2023 2024-2025 Phase 3 Engineering First Customers Construction Begins Connected 11