The Leverett Municipal Broadband Model An Overview of - - PowerPoint PPT Presentation

The Leverett Municipal Broadband Model

An Overview of Institutional, Contractual and Financial Arrangements

3/ 6/ 2016

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MLP Board of the Town of Leverett, MA

Preface

This material was developed by consultants at DHInfrastructure in cooperation with the Leverett Municipal Light Plant (LMLP) and the Town of Leverett, Massachusetts. The material is meant to inform policymakers and the general public on Leverett’s approach, and in particular, to offer information that will help towns considering how best to bring high speed Internet to unserved or underserved populations. The LMLP is a municipal light plant established under Massachusetts General Law 164 to provide high speed Internet and telephony services to residents, public buildings and businesses in the Town of Leverett. The service is known as “LeverettNet”. As a municipal entity, the LMLP serves as the custodian of the network assets, which are in turn owned by the Town. The LMLP is governed by a three member board of un-paid volunteers, each appointed by the Town's Select Board. The LMLP board appoints a Manager to oversee all contracts related to network operations. The LMLP Manager concurrently serves as the Town Administrator. More information on LeverettNet and the LMLP may be found at lmlp.leverettnet.net. DHInfrastructure LLC is an economic consulting firm that specializes in regulated network

• infrastructure. DHInfrastructure advises governments, investors, and utilities on matters

related to the energy, water, telecommunications and transport industries; applying principles of economics and finance to public policy, regulation, litigation of disputes and infrastructure acquisitions. More information on DHInfrastructure may be found at www.dhinfrastructure.com.

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While e ve ry e ffo rt ha s b e e n ma de to e nsure the q ua lity a nd a c c ura c y o f the info rma tio n a nd a na lysis c o nta ine d in this do c ume nt, the c o nte nts a re ma de a va ila b le witho ut wa rra nty o f a ny kind. Ne ithe r the L e ve re tt ML P no r DHInfra struc ture a c c e pt a ny re spo nsib ility o r lia b ility, whe the r dire c t o r indire c t, fo r the c urre nc y o r a c c ura c y o f the info rma tio n o r a na lysis, no r a ny c o nse q ue nc e o f its use .

Contents

• Contractual Arrangements
• Pre-construction and construction phases
• Operations
• Operational flow of funds
• Allocation of Responsibilities
• Pre-construction and construction phases
• Operations
• Financial Arrangements
• Overview of costs: Estimated annual cash cost (2016)
• Cost of service
• Project related costs and funding
• Total project costs
• Budgeted operating and maintenance costs
• Next Steps
• Follow-on work
• Appendix
• Glossary of acronyms and abbreviations
• Background and demographics

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Contractual Arrangements

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Contractual Arrangements

Pre-construction and construction phases

Pole Attac hme nt Agr e e me nt

Go ve rns ML P, Ve rizo n, a nd E ve rso urc e ’ s re spo nsib ilitie s fo r pre -c o nstruc tio n inspe c tio n a nd ma ke -re a dy wo rk fo r po le a tta c hme nts

Home owne r s T

• wn of L

e ve r e tt/ ML P Se le c t Boar d

HG&E MCG E ve rso urc e a nd Ve rizo n

Co ntra c t Co ntra c tua l re la tio nships 3/ 6/ 2016

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Constr uc tion Agr e e me nt

De fine s MCG’ s re spo nsib ilitie s fo r:

• Ne two rk de sig n to ho use ho lds
• POP De sig n
• Dro ps a nd ONTinsta llatio n
• Ma ke -re a dy o ve rsig ht
• Ne two rk e q uipme nt and fib e r

c o nstruc tio n

Right of E ntr y Agr e e me nt

Autho rize s ML P to insta ll a nd ma inta in ne two rk e q uipme nt o n the pre mise s

Pr

• je c t Manage me nt Se r

vic e s Agr e e me nt

De fine s HG&E ’ s re spo nsib ilitie s a s the pro je c t ma nag e r ("Cle rk-o f-the - Wo rks") fo r the de ve lo pme nt o f L e ve re ttNe t inc luding b idding a nd c o nstruc tio n pha se s

Contractual Arrangements

Operations

Middle -Mile Ac c e ss Ag re e me nt (3rd pa rty)

F T T H Ope r ator Se r vic e s Agr e e me nt

De fine s HG&E ’ s re spo nsib ilitie s fo r:

• Ne two rk c o nne c tivity to the

ISP

• Mo nito ring a nd ma inta ining

ne two rk e q uipme nt in Po Ps, middle -mile to ISP, CPE s a nd ONT s.

Pole Attac hme nt Agr e e me nt

De fine s the le a se te rms fo r ML P’ s po le a tta c hme nts a nd ne c e ssa ry po st-c o nstruc tio n inspe c tio ns ML P

HG&E MBI/ Axia

Subsc r ibe r s

E ve rso urc e a nd Ve rizo n 3/ 6/ 2016

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Co ntra c t Co ntra c tua l re la tio nships

Mainte nanc e Agr e e me nt

ISP Co ntrac t with Sub sc rib e rs

Cro c ke r Co mmunic a tio ns

Co llins E le c tric , Ada ms E le c tric , a nd Gra c e E le c tric

Communic ations Se r vic e s Agr e e me nt (maste r ISP c ontr ac t)

De fine s Cro c ke r’ s re spo nsib ilitie s fo r:

• Ma inta ining

c o nsume r pre mise s e q uipme nt

• Billing a nd

c o lle c tio ns

• Pro viding se rvic e

fe a ture s, e .g . te le pho ny a nd vo ic e mail

Contractual Arrangements

Operational flow of funds

T

• wn T

r e asur e r

Subscribers

Re q ue sts disb urse me nts Pa ys mo nthly b ill I ssue s mo nthly b ill F

• rwa rds ML

P fixe d c o st re c o ve ry fe e s HG&E Sub mits mo nthly invo ic e Sub mits mo nthly invo ic e fo r fixe d c o st re c o ve ry fe e Disb urse s funds* E ve rso urc e / Ve rizo n Sub mits a nnua l invo ic e fo r po le a tta c hme nts

ML P

Axia F

• rwa rds

middle mile fe e s

F unds fro m c o ntra c ting e ntitie s Invo ic e s fro m c o ntra c ting e ntitie s

Autho rize s a ll flo ws o f funds

T

• wn Ac c ountant

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Autho riza tio n *T

• wn tre a sure r ma ke s a ll

pa ya b le s to ML P c o ntra c to rs, i.e . PURMA, e tc .

Cro c ke r Co mmunic a tio ns

Co llins E le c tric , Ada ms E le c tric , a nd Gra c e E le c tric F unds fro m T

• wn o f L

e ve re tt F unds fro m sub sc rib e rs Invo ic e s fro m ML P

Allocation of responsibilities

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Allocation of Responsibilities

Pre-construction and construction phases

Inve stme nts in c o re ro ute r a nd re po rting so ftwa re

T

• wn of L

e ve r e tt/ ML P

Home owne r s

Se le c t Boa r d

Advise d o n pro c ure me nt a nd pro je c t mg mt.

MCG HG&E E ve rso urc e a nd Ve rizo n

L e ve r e ttNe t Br

• a dba nd

Committe e

MBI Owns utility po le s T a xpa ye rs pa y ta xe s to se rvic e de b t o n GOB* Advise d o n te c hnic a l spe c ific a tio ns a nd pro c ure me nt Ma na g e d pro c ure me nt pro c e ss Owns middle mile a sse ts

Co ntra c tua l re la tio nships Co ntra c t CAPE X Pla nning CAPE X F ina nc ing Owne rship Und e r c o nstruc tio n

GOB* Ge ne ra l Ob lig a tio n Bo nd Ma ke - re a dy wo rk

• n

po le s Built ne two rk

Cro c ke r Co mmunic a tio ns

Gra nt funding fo r ne two rk de sig n a nd c o nstruc tio n

Allocation of Responsibilities

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Operations

T

• wn of L

e ve r e tt ML P L e ve r e ttNe t

HG&E

Subsc r ibe r s

E ve rso urc e a nd Ve rizo n

Owns the “la st mile ” a sse ts Se rve s a s c usto dia n o f T

• wn’ s a sse ts

Owns po le s use d to mo unt fib e r

• Pro vide s inte rne t

se rvic e s

• Invo ic e s a nd

c o lle c ts b ills (whic h inc lude s ML P fe e *)

• Pro vide s e nd use r

c usto me r suppo rt Pro vide ro utine a nd e me rg e nc y ma inte nanc e se rvic e s Pro vide s b a c khaul se rvic e Pa ys b ill (whic h inc lude s ML P fe e *) ML P re spo nsib le fo r future CAPE X pla nning

Axia

Ma inta ins a nd mo nito rs ne two rk c o nne c tivity a nd e q uipme nt

Co ntra c t CAPE X Billing / Custo me r Se rvic e O&M Owne rship

Inspe c ts po le s

Cro c ke r Co mmunic a tio ns

Pa sse s thro ug h ML P fe e *Inc lude s O&M c o sts a nd c o ntrib utio n to de pre c ia tio n re se rve

Co llins E le c tric , Ad a ms E le c tric , a nd Gra c e E le c tric

Allocation of Responsibilities

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F unc tion Role (s) of E ntitie s Owne rship of Asse ts

• T
• wn of L

e ve re tt o wns the “la st mile ” a sse ts.

• ML

P se rve s a s the c usto dia n o f the T

• wn’ s a sse ts. It ma y b o rro w a g a inst the

re ve nue stre a m fro m a sse ts, b ut is re stric te d b y MGL 164 in its a b ility to se ll

• r dispo se o f the a sse ts.
• MBI o wns the middle mile a sse ts whic h run to T
• wn "a nc ho r institutio ns"; ML

P c o nne c ts to middle mile a t o ne lo c a tio n. T he re a re two Po Ps, o ne c o nne c te d to the o the r, a nd o ne c o nne c te d to the middle mile .

• Ve rizon and E

ve rsourc e o wn po le s use d to mo unt fib e r. ML

P is lic e nse d b y the utilitie s to use the po le s unde r a le a se a g re e me nt.

CAPE X Planning

• T
• wn of L

e ve re tt ma na g e d the pro c ure me nt o f L

e ve re ttNe t. It issue d IF Bs a nd RF Ps a nd ma na g e d the b id pro c e ss fo r ne two rk de sig n a nd c o nstruc tio n.

• HG&E wa s hire d to a dvise o n pro c ure me nt a nd pro je c t ma na g e me nt.
• ML

P will b e re spo nsib le fo r future CAPE

X pla nning .

CAPE X F inanc ing

• T
• wn of L

e ve re tt ta xpa ye rs pa y ta xe s to se rvic e de b t o n g e ne ra l o b lig a tio n

b o nd.

• MBI pro vide d g ra nt funding fo r ne two rk de sig n, c o nstruc tio n, a nd sta rtup.
• Subsc ribe rs thro ug h mo nthly fe e s pa y O&M e xpe nse s, whic h inc lude

c o ntrib utio n to a de pre c ia tio n re se rve .

• Croc ke r Communic ations ma de inve stme nts in c o re ro ute r a nd re po rting

so ftwa re b e fo re c o mme nc ing o pe ra tio ns.

Allocation of Responsibilities

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F unc tion Role of E ntitie s Ope rations

• HG&E ma inta ins a nd mo nito rs ne two rk c o nne c tivity a nd e q uipme nt unde r

a 5-ye a r o pe ra ting c o ntra c t with the ML P.

• Axia NGNe tworks USA pro vide s b a c kha ul se rvic e unde r a c o ntra c t with

HG&E .

• Croc ke r Communic ations pro vide s inte rne t a nd te le pho ne se rvic e s to the

sub sc rib e rs.

• Ve rizon and E

ve rsourc e pe rio dic a lly inspe c t le a se d utility po le s. Mainte nanc e

• ML

P c o ntra c ts fo r ma inte na nc e with Co llins E

le c tric , Ada ms E le c tric a nd Gra c e E le c tric .

Billing and c olle c tions

• Croc ke r Communic ations invo ic e s a nd c o lle c ts b ill pa yme nts fro m

sub sc rib e rs. Pa ys ML P fe e to ML P’ s a c c o unt with T

• wn o f L

e ve re tt T re a sure r. ML P fe e c o ve rs O&M, whic h inc lude s a c o ntrib utio n to a de pre c ia tio n re se rve a c c o unt.

Custome r Se rvic e

• Croc ke r Communic ations ha ndle s e nd-use r c usto me r suppo rt.
• Collins E

le c tric ha ndle s ne two rk se rvic e c a lls up to ONT

• n sub sc rib e r

pre mise .

• Adams E

le c tric a nd Grac e E le c tric ha ndle se rvic e c a lls a t the re side nc e ,

inc luding the ONT .

Re gulation

• MA De partme nt for Public Utilitie s re vie ws a nnua l re po rts sub mitte d b y

ML P.

• ML

P se ts pric e s fo r e nd-use r se rvic e s a s e sta b lishe d b y MGL

164.

Financial Arrangements

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Cost Cate gor y Cost

Overview of Costs

Estimated Annual Cash Cost (2016)

De bt Se r vic e on Ge ne r al Obligation Bond** ($175,000)/ ye ar Pr

• je c t-

r e late d c osts*

+

Insur anc e , pole r e ntals, labor , e le c tr ic ity, e tc . ($343,600)/ ye ar T

• tal Annual

Cash Cost Ope r ating & Mainte nanc e Costs

+

$518,600/ ye ar

*Inc lud e s o the r pro je c t c o sts, suc h a s ma ke re a d y c o sts, a nd po lic e d e ta ils. Se e slid e s o n Pro je c t-re la te d c o sts fo r mo re d e ta ils.

Re ve nue L e ve r e tt T axpaye r s $175,000/ ye ar ML P F e e fr

• m

L e ve r e ttNe t Custome r s*** ($343,600) $518,600/ ye ar

=

**T he a nnua l inte re st ra te o n the b o nd , a nd he nc e d e b t se rvic e , va ry fro m ye a r to ye a r, b e twe e n 2% a nd 4%. ***T he ML P fe e is a se pa ra te c ha rg e b ille d b y the ISP, Cro c ke r Co mmunic a tio ns, a nd tra nsfe rre d to the L ML

• P. T

he fe e is se t to re c o ve r ne two rk o pe ra tio n a nd ma inte na nc e c o sts, a s d e te rmine d b y the L ML P.

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Cost of Service

Project-related Costs and Funding

+

T

• tal Pr
• je c t

Costs ($3,733,734) T

• tal F

unding $3,733,734

+

Constr uc tion & r e late d c osts ($3,645,049) Ge ne r al Obligation Bond $2,900,917 Pr e liminar y De sign Cost ($40,000) Re ve nue Antic ipation Note s MBI Gr ants July- Se pt 2015 $738,300* MBI Gr ant in 2011 $40,000 F unding (be for e bonding) F unding (afte r bonding)

+

Othe r star t- up c osts ($48,685)

+

Costs Pr e - subsc r iption r e ve nue $26,817

+

*An a d d itio na l $100,000 wa s re se rve d b y MBI a s a ho ld b a c k a nd ha s no t ye t b e e n d isb urse d . T his fund ing will b e a pplie d to re d uc e the T

• wn's d e b t se rvic e o n the munic ipa l b o nd , in a c c o rd a nc e with the te rms
• f the L

e ve re tt T

• wn Me e ting b o nd a utho riza tio n vo te .

MBI Gr ant in Mar c h 2015 $27,700 F unding (total)

+ +

MBI Gr ants $806,000

=

15

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Cost of Service

Total Project Costs

E xpe nse Ite m Amount

Pre limina ry d e sig n (G4S) $40,000 Co nstruc tio n (MCG) $2,592,593 Co ntra c t with HG&E $207,000 Applic a tio n fe e to E ve rso urc e $66,150 Applic a tio n fe e to Ve rizo n $20,521 Ad d itio na l pa y to Ve rizo n $6,313 Applic a tio n fe e to Na tio na l Grid $2,239 Ve rizo n Co nd uit se a rc h $1,029 Mo d ula r Build ing c o nstruc tio n $264,360 Ma ke re a d y c o sts $327,577 Po lic e d e ta ils $107,000 Bo nd $8,400 Othe r insura nc e $400 Ad ve rtising $628 L e g a l $20,060 Gra nts c o nsulta nt $6,500 Misc e lla ne o us – po sta g e $469 Printing c o sts $2,353 POP E le c tric ity $1,364 Aud ito r $1,800 UT C me mbe rship $500 T re e wo rk $6,250 We b site $807 F ire e xting uishe rs a t Po Ps $736 Othe r sta rt-up c o sts $48,685

T

• tal c ommitte d or

spe nt $3,733,734

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Cost of Service

E xpe nse Ite m Cost ($)

De pre c ia tio n o f fib e r pla nt* 90,000 De pre c ia tio n o f e le c tro nic s* 52,000 PURMA due s 1,200 I nsura nc e 23,400 Bo nd fe e fo r po le s 4,200 Po le re nta l 18,000 Ac c o unta nt 3,000 Bo o kke e pe r, Ma na g e r, T

• wn T

re a sure r 5,000 Ro utine ma inte na nc e 32,000 Ne two rk o pe ra to r 82,800 L e g a l 10,000 POP e le c tric ity 5,000 Co nting e nc y** 17,000

T

• ta l OPE

X 343,600

Budgeted Operating and Maintenance Costs

*MGL Cha p 164 Se c . 57 re q uire s tha t the ML P c o lle c t re ve nue to c o ve r d e pre c ia tio n a nd d e po sit the re ve nue in a se pa ra te fund use d o nly fo r a sse t re ne wa ls. **MGL Cha p 164 Se c . 58 a llo ws re c o ve ry o f a re turn o f up to 8% o f the c o st o f the pla nt. L e ve re tt ha s inste a d

• pte d to re c o ve r a n a mo unt e q ua l to ro ug hly 3% o f o pe ra ting c o sts, a s a c o nting e nc y (we ll b e lo w the 8%

a llo we d re turn o n a sse ts).

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Next Steps

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Follow-on Work

This collection of slides is the first of several outputs intended to describe and analyze various aspects of the approach Leverett used to build, finance and operate its municipal broadband network. DHInfrastructure will work with the LMLP to produce additional outputs that support Leverett's commitment to be helpful to other communities, and to speak to questions the LMLP has been responding to in recent months. Possible future

• utputs include analysis of:
• risk allocation and incentives in the LeverettNet contractual

arrangements

• the Leverett model as a public-private partnership (PPP)
• LeverettNet’s financing structure, as compared to other
• ptions
• LeverettNet network usage/behavior for consideration of

bandwidth allocation and performance tuning

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Forthcoming analysis of the Leverett Model

Appendix

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Glossary of Acronyms & Abbreviations

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Ac roynm/ Abbre viation Me aning

CAPE X Ca pita l E xpe nditure CPE Custo me r Pre mise s E q uipme nt GOB Ge ne ra l Ob lig a tio n Bo nd HG&E Ho lyo ke Ga s & E le c tric IF B Invita tio n fo r Bid ISP Inte rne t Se rvic e Pro vide r L ML P L e ve re tt Munic ipa l L ig ht Pla nt MA Ma ssa c huse tts MBI Ma ssa c huse tts Bro a db a nd Institute MCG Mille nnium Co mmunic a tio ns Gro up, Inc . MGL Ma ssa c huse tts Ge ne ra l L a w ML P Munic ipa l L ig ht Pla nt O&M Ope ra tio ns a nd Ma inte na nc e ONT Optic a l Ne two rk T e rmina l OPE X Ope ra ting E xpe nditure Po P Po int-o f-Pre se nc e PPP Pub lic -Priva te Pa rtne rship PURMA Pub lic Utilitie s Risk Ma na g e me nt Asso c ia tio n RF P Re q ue st fo r Pro po sa ls

Background and Demographics

The Town of Leverett, population 1,800, is located in Franklin County, Massachusetts, between the Towns of Amherst, Montague, Sunderland, Wendell, and Shutesbury. An elected three-member SelectBoard oversees Leverett government, along with several other elected and appointed officials. The Town has approximately 43 miles of roads. The 2012 median income was $36,503 (MassDOR). Leverett has a diverse, rich cultural history, ranging from early industrial corridors along rivers and streams to the first Peace Pagoda in the country, to large tracts of forestland. Approximately 53% of the land in town is classified under M.G.L. Chapter 61 for forest, agriculture, or recreation protection. In August 2015, Leverett completed LeverettNet, a "last-mile" town-wide Fiber-Optic-to-the- Home (FTTH) broadband network. LeverettNet is owned by the Town and operated under the telecom authority of the Leverett Municipal Light Plant (LMLP), which contracts with third parties for Network Operator, Internet Services Provider, and maintenance functions. LeverettNet provides symmetrical 1-Gigabit-per-second (1Gbps) Active Ethernet connectivity between each subscriber location and the Internet Point of

• Presence. LeverettNet connects from the Point of Presence to the Internet Service Provider

at 2-Gigabits-per-second, via the Massachusetts Broadband Institute "middle mile" network, a project of the Massachusetts Technology Collaborative.

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The LMLP makes this report available for use by persons and organizations interested in municipal broadband, particularly in projects aimed at meeting rural broadband needs. LeverettNet is one model of how a small, rural town tackled the problem of providing 21st century telecommunications infrastructure to its residents, businesses, and municipal departments.