1 Where we are now How we got here Future Options Conclusions - - PowerPoint PPT Presentation

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 Where we are now  How we got here  Future Options  Conclusions – Path Forward

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2010 2011 2012 2013 2014 2015 2016 2017 Forecast Annual Revenue 1,183,519 1,581,991 1,618,726 1,972,125 2,188,813 2,023,220 2,046,069 2,099,412 Annual O&M Expense (709,660) (671,688) (691,317) (885,425) (979,511) (1,021,403 (931,788) (819,866) Net Capital Expense (738,743) (577,036) (430,646) (708,512) (648,005) (773,532) (757,500) (943,616) Net Cash to/(from) Electric (405,962) 292,200 623,852 376,696 545,262 223,167 352,917 317,234

• $1,250,000
• $1,000,000
• $750,000
• $500,000
• $250,000

$0 $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000

Net Cash Funding of Broadband

Total Inception To-Date (12/16)

Operating Revenues $16,238,616 Operating Costs* $ 9,796,292 Capital Investment $20,719,472 Capital Contributions (Others) $ 7,099,252 Net Cash Funding (Ratepayers) ** $10,454,226

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* Does not include depreciation expense: $9,800,600 ** Includes NoaNet Assessments and Support: $3,276,329

• Transport
• Fiber Premium Service
• Up to 1,000 Mbps: MRC = $800
• Access Internet (NEW)
• 100/150 Mbps: MRC = $100/$150
• Fixed Wireless
• Residential/Small Business
• Best Effort Service
• Internet
• Wholesale Customers
• Point-to-Point Wireless
• Dark Fiber
• Limited Offering

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2010 2011 2012 2013 2014 2015 2016 2017 Forecast Other Revenue 1,746 155 50,815 248,194 286,664 345,737 522,741 524,641 Fixed Wireless 134,023 142,380 133,765 113,516 97,395 89,610 75,282 69,708 Internet Transport Service 330,196 370,388 278,533 286,457 135,091 119,181 76,764 44,324 WiFi 3,164 3,090 2,378 1,107 468 364 312 312 TDM 199,813 213,844 164,521 148,184 146,124 86,428 69,372 69,372 Ethernet 514,578 852,134 988,714 1,174,667 1,523,071 1,381,900 1,301,597 1,391,055 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 $2,200,000

Broadband Revenue History

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• Includes fibers acquired

through agreements:

• Pacific Northwest

National Laboratories

• Bonneville Power

Administration

• City of Richland
• Department of Energy
• Energy Northwest
• Franklin PUD

• Covering O&M and Capital Costs
• Incremental customer growth & revenue preservation
• Limited and Focused Capital investment
• Multi-tenant/cellular /access-internet
• Line Extension Credit = 75% x MRC x Term
• Partnerships & Strategic Agreements
• NoaNet NCS – Comprehensive Services
• NoaNet Momentum (20.72% ownership)
• Total Assets: $98.7M
• 2017 Projected Revenues: $35M
• Long term debt paid off in 2016
• +3,000 miles of fiber; present in every county

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• Broadband is the “Next Utility”

 Bridge the “Digital Divide”  Businesses and public entities under served  Limited access and high costs

• Enhance Livability of the Community

 Schools, hospitals, libraries, city services

• Promote Economic Development
• Link BPUD Operations Together

 Also link with NoaNet and other PUDs across the state

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• Broadband Planning

 2009 Last Formal Business Plan Document  Now done “dynamically”

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Annual budget cycle

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Regular strategic discussions/workshops

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Updates to wholesale rates, terms and conditions

• Strategic Planning w/ Commissioners

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June and October 2011

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December 2012

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June and July 2013

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May and June 2015

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December 2016 (Access Internet Promotional)

• NoaNet Network Coordinated Services

 Decision November 23, 2010  January 2011: Implementation  February 2014: Expanded Billing, Outside Plant and Engineering Services  January 2017: Fee structure change to gross revenues vs. line item services 13

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• Status Quo (Staff Recommendation)
• Cover O&M and capital expenses
• Revenue preservation transitioning to growth
• Access-internet; small and medium businesses
• Cellular expansion to small cell and 5G
• Aggressive – “Legacy Investment”
• Invest more (FTTx)
• Community “left behind”?
• Education, entertainment, health care
• Partnerships and/or Sell Assets
• NoaNet
• Other Interested Parties

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• Commoditization of Services

 Faster/Cheaper with Increasing Competition

• Constrained Market/Revenue Saturation

 “Incremental customer growth” may not increase

revenue

 New revenue streams needed

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Fund continued reliable operation of core network

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Preserve original purpose



If additional return on investment is desired

• Capital Investment

 Diminishing Appetite – District and Customers  Core Network Built/Costly Line Extensions

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• Lit services revenue growth
• Access Internet - Small & Medium Businesses
• Dark fiber
• Adapt to customer demands
• Strategic opportunities
• Wireless/Cellular
• BPUD Fixed wireless - managed ramp down
• Retail Service Provider Networks competing and covering gaps
• Cellular backhaul expanding to small cell
• Future 5G platform
• Evaluate business case for:
• increased capital investment
• Increased line extension credits; i.e. longer term return on investment
• Net Cash Flow
• Positive (Forward and Look Back)
• Negative if short term capital investment delivers long term gains

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• 240 day initial promo
• Up to $10K credit towards construction
• 2 year contract
• 100 Mbps Access internet $100
• 150 Mbps Access internet $150
• 1-5 phone lines $25 each

 Customer churn

 Cost driven  Reliability driven

 Construction costs higher than expected  Can’t execute fiber builds on time  Poor broadband network service

(reliability)

 May create demand for a large future

investment by the District

• Limited time offer marketing
• Allows promo cut-off at any time
• Closely track actual build costs
• If multiple builds are greater than $10k; then

stop

• Establish overall maximum $ investment

cap

• Approved Promo for 60 day initial period
• $10K line extension credit
• Rates
• Establish reporting milestones
• Requested approval at December 13

Commission Meeting

• Less than $6500
• 33 quotes
• 11 new orders
• 9 require laterals ($10k-$20K)
• $6500-$10K
• 22 quotes
• 4 new orders
• 5 require laterals ($5k-$35K)
• $10K +
• 37
• On-Net
• 23 quotes
• 4 new orders
• 15 change orders

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Model Fiber Customers Average Fiber Build Costs Capital Average Fiber Revenue Monthly Revenue Payback Years 100 $6,500 $650,000 $125 $12,500 4.3 Actual New Builds 01/2017-04/2017 Fiber Customers Average Fiber Build Costs Net Capital Average Fiber Revenue Monthly Revenue Payback Years 17 $6,612 $112,410 $130 $2,215 4.2 On-Net Actuals Fiber Customers Average Fiber Build Costs Capital Average Fiber Revenue Monthly Revenue Payback Years 5 $0 $0 $120 $600 0.0 Combined New Builds & On-Net Fiber Customers Average Fiber Build Costs Capital Average Fiber Revenue Monthly Revenue Payback Years 22 $6,612 $112,410 $128 $2,815 3.3

KENNEWICK 5 YEAR PRO FORMA WITH ACCESS INTERNET

LINE ITEM DESCRIPTION 2016 2017 2018 2019 2020 2021

Revenues

% Revenue Increase for transport 1.5% 1.25% 1.0% 0.75% 0.05% Transport Revenues $2,080,716 $2,111,927 $2,138,326 $2,159,709 $2,175,907 $2,176,995 Transport Churn $(10,000) $(10,000) $(10,000) $(10,000) First Year Access Interent Revenue $55,000 $65,000 $65,000 $65,000 Access Internet Revenues $153,600 $307,200 $460,800 $614,400

Total Revenues

$2,080,716 $2,156,927 $2,346,926 $2,521,909 $2,691,707 $2,791,395

Operating Expenses

O&M Direct Costs

$(842,971) $(855,812) $(881,486) $(907,931) $(935,169) $(963,224)

Capital Expenditures

Capital Direct Costs

$(1,039,033) $(500,000) $(500,000) $(500,000) $(500,000) $(500,000) Aid to Construction $42,713 Backbone Fiber $(125,000) $(175,000) $(200,000) $(250,000) $(150,000) Access Internet Line Extension $(650,000) $(650,000) $(650,000) $(650,000) $-

Total Capital

$(996,320) $(1,275,000) $(1,325,000) $(1,350,000) $(1,400,000) $(650,000)

Total O&M and Capital

$(1,839,291) $(2,130,812) $(2,206,486) $(2,257,931) $(2,335,169) $(1,613,224)

SURPLUS (SHORTFALL) FROM OPERATIONS

$241,425 $26,115 $140,439 $263,978 $356,538 $1,178,171

SURPLUS (SHORTFALL) FROM OPERATIONS Original Model

$241,425 $(43,885) $156,839 $276,778 $365,738 $1,163,771

Assumptions:

100 customers a year $150K total new revenue, $125 MRC, 50% of revenues first year $6,500 average build costs Churn for 2017 $100K

• Sales Cycle is taking longer
• RSP time to generate demand longer
• Quote process is taking longer than

expected

• Less churn than expected
• Existing customers moving to higher Access

Rate

• Access rates are not meeting Small

business needs

• Laterals still needed to get closer to

customers

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• Collecting feedback on why quotes below

$10K construction have not signed up for service

• Evaluating laterals
• Seeing if RSP’s can get more customers to spread

costs out

• Evaluating impact of a Small business Access

Rate

• Evaluating a potential targeted marketing

campaign

• Making changes to Quoting processes
• Developing Platform Product Models

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• Purpose
• increase value and competitiveness of NoaNet and

member telecommunications infrastructure

• Access Product
• much like Access Internet, delivered "Over-the-Top"

(OTT) of NoaNet and member broadband infrastructure to Service Providers for end user consumption

• Initial Platform product focus is Voice due to

high demand & high value to consumers

• Platform focus
• build reference accounts in collaboration with

aligned Service Providers

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• Voice
• Jive (PBX, call center based)
• Alianza (business, single user)
• Access Control/Security
• Video Surveillance
• Premise based/Cloud based
• Cloud Storage/Commute
• Secure storage on NoaNet
• Applications services/Security Suite

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• Dark Fiber Products
• Wireless Distribution Products
• Wireless Backbone
• Residential Services (FTTH)
• Partnerships

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• Allow us to work through next steps
• Continue to work with RSP’s on products
• Further development of business models
• Look at alternative construction methods

to lower costs

• Small Cell Strategy
• Outcome looks very positive

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• FCC Order 14-153 enables mobile operators to append

wireless facilities to utility poles, light poles and road signs

• Muni’s may continue to enforce compliance with “generally

acceptable” building, structural, electrical and safety codes

• Deployments cannot be unreasonably delayed
• Joint Use ‘rent’ consistent with wireline attachment
• 75% of small cells to be on utility poles
• FCC Order 11-50
• Must allow access by wireless carriers
• No longer limited to ‘Comm Space”
• Must give access to pole tops
• Must perform work in a timely manner

• Macro Coverage already

deployed

• Hot Spot Demands cause

congestion and poor quality of service during busy times

• Coverage dead spots
• Gaps in Macro

Coverage

• Building penetration

challenges

• 5G data offload
• Availability of back haul

solutions

• Fiber
• Line of Sight

 Small Cell Peppered Topology Fiber Network on Poles  See similarities

✔฀ Pole Ownership ✔฀ Power ✔฀ Easements ✔฀ Fiber ✔฀ Engineering ✔฀ GIS ✔฀ Macro Cell connectivity ✔฀ Joint Use Coordination ✔฀ Relationships with Municipalities ✔฀ Remote Hands ✔฀ Right of Way ✔฀ Ability to work in supply space ✔฀ Access to Major carrier MTSO’s ✔฀ Master Services Agreements ✔฀ SLA Compliance ✔฀ Carrier Class Ethernet

TURN KEY SOLUTIONS BROUGHT TO YOU BY THE PUBLIC UTILITY DISTRICTS OF WASHINGTON

• One Stop Shop for Turf Vendors to select radio attachment locations
• PUD’s prepare GIS based data base of pole data
• Classify poles by ‘small cell readiness’
• Class One – Pole Ready, Fiber Ready low cost entrance to system
• Class Two – Minor Make Ready, Fiber Ready minor cost entrance to system
• Class Three – Major Make Ready, Taller Pole, Fiber Not-Ready high cost
• Carrier Orders service from NoaNet by class, ships radio to PUD
• PUD places radio on pole either in neutral space, top of pole, per standards

• PUD Owns and Installs
• Cabinet
• Fiber Drop and CPE
• Power Feed
• Ground, Stand off and Riser
• Packaged solution
• Installation and Configuration
• Fiber/Ethernet Backhaul
• No meter, power included in fee ???
• Repair and Replace O&M services

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DISCUSSION