MUNICIPAL FIBER FEASIBILITY STUDY The City of Savannah, Georgia - May 25, 2017
Agenda 2 Feasibility Study Overview • Demographic and economic overview • State of Broadband in Savannah • Stakeholder meetings and survey results Preliminary Network Design Overview of Financial Models Discussion and Q&A Recommendation and Proposed Next Steps Confidential & Proprietary Property of Magellan Advisors
Savannah and Chatham County 3 Confidential & Proprietary Property of Magellan Advisors
Demographic and Economic Overview 4 Relatively high levels of: • Young adults, ages 15 to 34 • Educational achievement (Source: US Census Data) United States Georgia Chatham County Savannah United States Georgia Chatham County Savannah 85 years and over 75 to 84 years 6.6% 8.0% 65 to 74 years Bachelor's degree or higher 7.9% 60 to 64 years 9.8% 55 to 59 years 52.3% Some college or associate's 49.6% 45 to 54 years degree 43.5% 46.1% 35 to 44 years 28.8% 25 to 34 years High school graduate (includes 28.3% 20 to 24 years equivalency) 31.0% 29.7% 15 to 19 years 12.3% 10 to 14 years 14.0% Less than high school graduate 17.6% 5 to 9 years 14.4% Under 5 years 0% 10% 20% 30% 40% 50% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Confidential & Proprietary Property of Magellan Advisors
Demographic and Economic Overview 5 Strong in hospitality, arts, education, entertainment, food services, recreation and retail trade (Source US Census Data) United States Georgia Chatham Savannah United States Georgia Chatham County Savannah $66,857 Graduate or $61,370 Resources, construction $53,695 professional degree and maintenance $47,813 $50,595 Production and $49,989 Bachelor's degree $42,617 transportation $37,270 $33,820 Sales and office Some college or $31,673 associate's degree $29,808 $25,486 Services $28,043 High school graduate $26,350 (includes equivalency) $24,426 $21,296 Management, science and arts $20,361 Less than high school $19,611 graduate $17,670 0% 10% 20% 30% 40% $16,935 Confidential & Proprietary Property of Magellan Advisors
State of Broadband in Savannah 6 Nominally strong, but inconsistent, residential offerings, including fiber-based services • Median: “up to” 300 Mbps/25 Mbps for $150/mo. • Minimum: 1.5 Mbps/.768 Mbps for $30 • 75% of locations survey had no competitive options Fewer retail offerings for business • Business Median: “up to” 150 Mbps/25 Mbps for $264/mo. • Many locations with no competitive options • Incumbent and independent providers offer services on an individual case basis Confidential & Proprietary Property of Magellan Advisors
Areas that Meet Broadband Definition 7 Shaded areas represent areas that meet the 25Mbps/3Mbps FCC definition of broadband. These data rates can be provided by several technologies other than Fiber, but have upper limits to speed increases. Confidential & Proprietary Property of Magellan Advisors
Areas with 3+ Non-Wireless Providers 8 Shaded areas represent areas that are serviced by at least 3 non-wireless providers that include copper wire, coaxial and fiber. Confidential & Proprietary Property of Magellan Advisors
Areas with Fiber-Optic Service 9 Shaded areas are served by Fiber Optics and have capability to provide speeds up to twenty times faster than the 25/3 FCC definition of broadband. Also capable of full symmetrical service. Confidential & Proprietary Property of Magellan Advisors
Survey Responses 10 Surveys promoted across County and City webpages, with printed surveys collected throughout county to randomly acquire voluntary responses. Household Responses: 1,135 Business Responses: 134 Excellent response rates yield high statistical relevancy of data. Households: 95% confidence level with a ±3% margin of error Businesses: 95% confidence level with a ±8% margin of error Confidential & Proprietary Property of Magellan Advisors
Household Survey Findings 11 11 No Reasons for not having internet access 3.1% Services are too expensive 81.8% Access intenet with mobile phone 33.3% Yes Access internet elsewhere 27.3% 96.9% Services are too slow or unreliable 18.2% Not available at my home 3.0% Households with Don't need the internet 0.0% internet access 0% 20% 40% 60% 80% United States Savannah 90.0% 3 or more 95.2% Internet-enabled 47.0% devices in U.S. vs. 5 or more 80.2% Savannah 8.7% households 10 or more 23.8% 0% 20% 40% 60% 80% 100% Confidential & Proprietary Property of Magellan Advisors
Internet Access and Satisfaction 12 12 Cable 83.6% DSL 12.4% Connection Fixed Wireless 1.9% method of Dial-up 0.9% Mobile Wireless 0.7% Savannah Satellite 0.3% households… Fiber-optic 0.2% 0% 20% 40% 60% 80% under $30 $30-49 $50-74 $75-99 $100-149 over $150 All Types 5.1% 20.7% 37.2% 22.7% 10.7% Fixed 33.3% 13.3% 40.0% 6.7% 6.7% … and what it Fiber 100.0% Cable 5.5% 18.3% 37.6% 24.2% 10.6% costs them. DSL 3.6% 35.5% 39.1% 11.8% 9.1% Mobile 33.3% 33.3% 16.7% 16.7% Satellite 100.0% 0% 20% 40% 60% 80% 100% Confidential & Proprietary Property of Magellan Advisors
Household Broadband Satisfaction 13 13 Yes No Unsure Does your All Types 22.3% 68.9% current DSL 19.6% 71.4% Cable 21.6% 69.6% broadband meet Satellite 33.3% 33.3% Mobile your household 50.0% 50.0% Fixed 53.3% 40.0% needs? Fiber 100.0% 0% 20% 40% 60% 80% 100% Support, services, and price are major issues Confidential & Proprietary Property of Magellan Advisors
Business Survey Findings 14 14 No No Businesses 2.3% 8.7% with internet Businesses Yes Yes access that consider 91.3% 97.7% it a utility Businesses that would move for better internet access 1 - Would definitely NOT move 2 3 4 5 6 - Would definitely move 47.6% 9.5% 9.5% 4.8% 9.5% 19.0% 0% 20% 40% 60% 80% 100% Confidential & Proprietary Property of Magellan Advisors
Business Internet Access 15 15 How Cable 50.7% Fiber 18.7% businesses DSL 13.4% access the Fixed 7.5% Mobile 6.7% internet T1 3.0% 0% 10% 20% 30% 40% 50% How different sized businesses access the internet Confidential & Proprietary Property of Magellan Advisors
Business Internet Access 16 16 under $49 $50-99 $100-149 $150-199 $200-299 over $300 All Savannah 2.8% 32.4% 11.3% 11.3% 12.7% 29.6% What Cable 55.6% 5.6% 11.1% 16.7% 11.1% Mobile 37.5% 37.5% 12.5% 12.5% businesses DSL 38.1% 23.8% 23.8% are paying Fixed 33.3% 33.3% 33.3% Satellite 12.5% 12.5% 37.5% 37.5% Fiber 15.4% 7.7% 7.7% 69.2% 0% 20% 40% 60% 80% 100% How satisfied they are Confidential & Proprietary Property of Magellan Advisors
Fiber Infrastructure Principles 17 Enhance Economic Development Increase Broadband Adoption and Utilization Improve Public Efficiency and Effectiveness Reduce Communications Spend Support Reliability and Performance Confidential & Proprietary Property of Magellan Advisors
Business Model Guidelines 18 Fiber-optic networks are long-term infrastructure rather than one- time projects. Local support from stakeholders and community is essential • Education of the opportunity and how it meets their needs Focus on the benefits of broadband rather than technology Balance community benefit and financial sustainability to remain successful over the long-term. Focus on organizational strengths when evaluating solutions • Build on current competencies and resources • Consider public and private partnerships to address weaknesses Confidential & Proprietary Property of Magellan Advisors
Network Design Phased Over Time 19 Government and Civic Schools and Libraries Health and Public Safety Communications Towers Confidential & Proprietary Property of Magellan Advisors
Business Model Options 20 Public Services Joint Retail Fiber To Provider Ownership The Premises Owns network Jointly owns Fully owns • • • • Provides fiber to the network network community with partners Provides retail • • anchors • Provides fiber broadband Sells dark fiber to community services to • to retail anchors customers providers • Retail partner would serve customers Confidential & Proprietary Property of Magellan Advisors
Public Services Provider Model 21 Public Services Provider Projected Community Anchor Institution Sites 45 Estimated Cost of Annual Services from Service Providers $122,157 Construction and Equipment Costs Backbone Fiber $11.04M Electronics, Core and CPEs $350K Cabinets and Splitters $259K Data Center $500K Estimated Total Cost of Network $12.14M 5% Municipal General Obligation Bond, 20 Years Estimated Total Bond Amount Needed $12.64M Estimated Annual Payment, Principal and Interest $986K Estimated Annual Net Revenue $112K Estimated Annual Operations and Maintenance $15K Estimated Total Payback Principal and Interest at 20 Years $19.7M Estimated Annual Revenue needed to Achieve 20 Year Payback $1.12M Confidential & Proprietary Property of Magellan Advisors
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