Memorandum
City of Lawrence
City Manager’s Office
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TO: |
David L. Corliss, City Manager |
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FROM: |
Diane Stoddard, Assistant City Manager |
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DATE: |
January 20, 2015 |
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CC: |
Casey Toomay, Assistant City Manager |
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RE: |
Continued Discussion on Proposed City Fiber Policy and Wicked Fiber Request |
Please place the following item on a City Commission meeting agenda:
Consider adoption of Resolution 7097 establishing a fiber policy and fiber leasing framework for the City of Lawrence. Continue discussion on the Wicked Fiber economic development request. Take action, if appropriate.
Background:
The City Commission discussed the proposed fiber policy, the Wicked Fiber economic development request and the RG Fiber request at its meetings on November 11, 2014 and October 7, 2014. Additionally, there was a Study Session with Wicked Fiber on December 2, 2014 and a Study Session with RG Fiber on December 9, 2014. There are links at the end of this memorandum to various meeting materials provided during these prior discussions on the topic.
Discussion on Common Carriage:
The recent conversation related to the proposed fiber policy has focused on several key items about which the City Commission requested additional information. Specifically, the City Commission requested additional information on the issue of common carriage. Common carriage refers to infrastructure that could be utilized by multiple providers to the end destination (such as multiple providers on one fiber run to a home or business). Wicked Fiber representatives originally suggested that businesses receiving a subsidized market rate least under the fiber policy should be required to install common carriage infrastructure. More recently, Wicked Fiber representatives have suggested that this common carriage infrastructure be required by all companies leasing city fiber. Under this, the company that owns the fiber would be required to make available fibers, at an established lease rate. Others have suggested that common carriage may not be functional under a model in which the infrastructure between the city fiber and actual homes/businesses would be privately owned. For example, RG Fiber representatives have indicated that they would not want to provide service through infrastructure owned by other competitor companies and instead would want to own and control its own infrastructure to ensure service quality.
The City Commission requested that staff seek advice from CTC, the company that completed a technology report for the City in 2013, regarding the common carriage issue. Staff also requested CTC to review and comment on the draft fiber policy under consideration. Specifically, staff posed to CTC, the following questions and scope:
Questions/Scope:
The Lawrence City Commission has been discussing a fiber policy that would set up a framework for private companies to lease the City’s middle mile fiber for the purposes of building out the last mile to homes and businesses in order to provide better broadband services in Lawrence. One of the issues with the policy is whether or not to require the private companies who utilize the City’s fiber to build a common carriage system. Are there any examples of communities that have a publicly-owned middle mile framework and require the private companies leasing that middle mile fiber to build common carriage infrastructure for the last mile? If so, how is that framework working? Generally speaking, where has common carriage worked for final mile fiber to the home? Are there any particular circumstances that are making it successful in those cases? How is it working in those places? If the common carriage infrastructure is privately owned, what types of regulatory mechanisms, if any, are in place to ensure affordable access by other providers? What are typical costs per drop for a common carriage network?
Attached is the CTC issue paper addressing these items. CTC is recommending that the City take the most simple approach to its fiber policy and not require common carriage due to the potential chilling effect it may have on other service providers being willing to enter the Lawrence market. As CTC points out in its memo, common carriage is not utilized in most situations where the fiber is privately owned. There was one exception to this that was identified- in Urbana/Champaign, Illinois. However, CTC points out that the Urbana/Champaign instance is not a good comparison because the common carriage wholesaling requirement was adopted voluntarily by the private company as part of a broader set of contractual agreement provisions. In the Urbana/Champaign instance, it appears that the community entered into one master public-private partnership with UC2B Fiber Optic Network to serve the entire community with fiber which would be subject to the common carriage requirement. This structure is different than the middle mile concept that had been identified as a desired model for Lawrence, which would theoretically result in different private companies owning the “last mile” (actual residential or business connection) through various neighborhoods. Another example of Cortez, Colorado was cited in an earlier meeting. In the case of the Cortez fiber project, the City itself owns the fiber network, which is a common carriage network. Again, that is a different model than the middle mile structure in which the City owns a “middle mile” ring that it leases to encourage private investment to the last mile.
Fiber Policy Draft:
The City Commission has discussed the draft fiber policy prepared by staff. This policy would establish the general goals and framework associated with leasing of the City’s excess fiber assets for the purpose of encouraging high speed broadband in Lawrence. There appeared to be agreement that adoption of a fiber policy would be an important first step before considering any of the leasing requests. Several other items in the discussion list below could have an impact on the policy, depending upon City Commission direction.
The policy would enable any company to approach the City about leasing dark fiber, on a first come, first served basis. The framework would make it relatively easy for approvals to be granted for companies wishing to lease dark fiber with the City. The policy includes the ability of a company to receive reduced or waived fees from the market rate during the first five years of operation if they provide certain services desired by the city. At the end of the five year period, the company would be subject to market rate leasing established by the policy. The following is a general outline of the fiber leasing policy draft:
· Market Rate: The previous policy draft established a market lease rate of $250/year/fiber mile- the new draft sets the market lease rate at $62.50/year/fiber mile. (Note- RG Fiber requested consideration of a lower rate of $62.50/year/fiber mile. As staff mentioned previously, the proposed $250/year/fiber mile rate was arrived at based upon a range of lease rates the City has with private providers as well as some private rates charged around the country. However, under the City’s leases of private fiber, the City receives a service level agreement guaranteeing limited downtime. The City’s lease arrangement for leasing of its fiiber would include no such guarantees. Based on this, Staff suggests that the policy set the lease rate at the rate RG Fiber proposes and could revisit the rate in the future and could adjust as needed.)
· Companies using City fiber must use the fiber to provide symmetrical high speed internet services of at least 100 megabits per second
· Standard lease term is 5 years with two renewable 5 year extensions (Note- RG Fiber has requested consideration of a longer term related to the need for the company to enter into long term contracts with its content providers. Staff suggests that the policy draft as worded provides the standard lease structure of 5 years with two renewable 5 year extensions and that the City Commission could deviate from this standard should circumstances warrant. Staff believes that this flexibility does exist within the policy as drafted.
· Connections to the City’s fiber network can only be made at established vault locations
· Only the City or city-approved vendors can splice into the fiber
· Private companies are responsible for costs associated with connections to the City’s network and infrastructure
· Companies will be appropriately insured
· Companies must follow the City’s right of way regulations
· In order to spur high speed internet development in Lawrence, market rate lease fees may be waived for the first five years for companies meeting the following criteria:
o Provide service to at least 300 residential or business customers and achieve this service level within 24 months of signing the agreement with the City
o Provide free service to households with a net income at or below 100% of the net income eligible for food assistance as defined and published by the Kansas Department for Children and Families
o Provide free service to non-profit organizations and institutions within its service area
Possible Action: Adopt Resolution No. 7097, establishing a fiber policy and fiber leasing framework for the city. Staff believes that this policy establishes a neutral framework for any provider to seek a lease with the city under equal terms. Based upon the CTC recommendation, staff does not suggest including a common carriage requirement in the City’s policy.
Wicked Fiber Request:
The City Commission should provide feedback and direction on the Wicked Fiber request.
To recap, Wicked Fiber has made the following request to the City:
The establishment of the fiber policy outlined above would address Wicked Fiber’s request for leasing fiber and as new fiber is installed, Wicked could utilize the policy to establish additional fiber leases with the City. The policy also addresses the co-location and fiber splicing issues, both of which City staff believes are important security issues. The City would establish a list of approved vendors that companies leasing fiber could use to make connections to the City’s fiber.
Loan Guarantee Considerations:
Staff believes that the City Commission should consider, as part of its deliberations about Wicked Fiber’s request for a loan guarantee, a number of issues set forth in the attached memo.
Possible Action: Provide direction related to Wicked Fiber’s request for a loan guarantee and the franchise fee waiver as an economic development request. Staff would work to finalize any of the necessary documents with Wicked Fiber in accordance with the City Commission’s direction.
Links to Resources:
November 11, 2014 City Commission Agenda Materials: Staff Memo & Attachments
Letter from RG Fiber - Added 11/11/14
October 7, 2014 City Commission Agenda Materials: Wicked Fiber discussion and RG Fiber discussion Development request. Staff Memo & Attachments Correspondence from Wicked Fiber Additional Correspondence – Added 10/07/14
September 9, 2014 City Commission Agenda Materials: Wicked Fiber Request and PIRC recommendation – includes links to all Wicked Fiber requests, staff reports, etc.
May 21, 2014 PIRC Meeting: Materials and Minutes
January 21, 2014 PIRC Meeting: Materials and Minutes