Workshop ReportingWorkshop 1A: Funding a Broadband Wireless Municipal Network Nick Ellis, Stone & Youngberg, LLP: The workshop really exposed the deeper concern of what’s appropriate for a community in regard to funding municipal wireless networks. On the other hand, we have public private corporations providing the service, and this brings to the table concerns about how to finance this. Instead of looking to jumpstart this without a clear idea of what you’re going to provide, imagine what the revenue source is going to be six months down the line. It will define the financing technique, whether you’re a public organization and you’re providing an emergency service—that’s going to put you more in the realm of a debt instrument type of financing. If you’re a private organization providing service to end users in the community—that puts you probably more on the equity side of things. We divided it into debt and equity and two to three key financings for each one. The advantage to bonds is that they’re tax exempt, which lowers your cost of capital by 20% as opposed to taxable financing. The alternatives are commercial loans that you can get from banks. On the equity side and public-private partnerships: These are okay for larger communities, but smaller communities might not get the same level of interest, and the partnership might not be quite so appropriate. There are opportunities for grants, the e-Rate program, and, in California, PUC’s Teleconnect Fund. The third option on the equity side would be to have cash on hand. Considering the size of the city—say, three square miles—it’s a viable mechanism. If you’re going to go the debt route, consider the credit strength behind a loan. Look at the risk tolerance. Can I take on debt? Can we execute a plan? The promise to repay investors is probably the largest component of that credit strength. What type of legal covenants will you put in place? How much collateral will you pledge? How long will the payment terms last? With Wi-Fi, and WiMAX coming down the pipeline, the network could become obsolete in four to five years. Be sensitive to the economic conditions, including the interest rates you take the loan at. You might get whacked by interest rate spikes. We mentioned the cost of capital being 20% cheaper if you do tax-exempt financing. It makes it a compelling alternative for many cities. On the equity side, choosing a partner was the most prominent concern that we raised in our workshop. A number of partners were proposed, including “high-net-worth individuals.” Turn to individuals in your city or county willing to make the investment back into your community. On the equity side, who’s going to own the network? ROI and the cost of capital—all these things come out on the equity side. They’re things cities don’t often deal with but that they would need to look into closely. Just a quick study in debt. Where do you find revenue? Revenue defines the financing technique. Alameda had no money. We helped them raise $33 million to pay off a construction loan for their Internet service that they provide throughout their 16 square miles to their citizens. Five years later, they promise to take out that loan, refinance it, and pay it off at that time. That gives them a chance over five years to establish a history of generating revenues, which then will set the precedent of financing this long term and get the healthy enterprise on its feet. Workshop 1B: Emergency First Responders and Broadband Wireless Paul Butcher, Marketing Manager, State & Local Government, Intel: We started with the end in mind. One quote summarized it very nicely. The core mission of the city is public safety—Winston Churchill. That is really the first mission of a city. What is the overarching vision, as we look at first responders and taking care of people in a community? To provide a summary, it has to do with really pushing information and tools to the edge, to the people in the field, who have to make snap decisions, who need that information. First responders say, Hey, tech companies, you’ve been building all these tools and siphoning information, but you’ve forgotten the person at the edge getting information over a voice network. As we colored in this theme of pushing information to the edge, some things stand out: • Video surveillance for detection of crime, • Recognizing gunshots and turning cameras, • Streaming video on buses, • Asset tracking was another big one—not only the vehicles under a wireless cloud, but the assets that depart the car with the officer. “Hey, officer Jones, did you know you left your shotgun in the field?”
Workshop 2A: Public-Private Partnerships Stephen Raiment, CTO & Cofounder, BelAir Networks: Five of the six attendees in the workshop said the models they were pursuing were public-private relationships. This seems to be a mode of doing things that seems to be working pretty well for a variety of people. The types of partnerships that one adopts will vary depending on the market segment. We started by talking about market segments. This has nothing to do with who owns the network but what are application types: • The city ISP public Internet access, • the city as an enterprise, • public safety and first responders, and • commercial ISPs.
We wanted to customize the public-private partnership for each of those segments but didn’t have enough time. The public-private relationship started by Wireless Philadelphia was a nonprofit that was going to be used to fund an outsourced, wholesale network with multiple retail service providers and the city acting as an anchor tenant in providing critical resources. It’s similar to the model Cometa used a couple of years ago. Others have proposed this kind of model before. Do you think these partnerships are sustainable? In particular, EarthLink and Google? The overwhelming response was no. However, it’s been fabulous for generating visibility for the city and private partners. It’s helped to raise the profile and priority in other municipalities as well. This wouldn’t be happening without the leadership from some of those municipalities. What happens come contract renewal time? Everybody was sure it would promote competition between the private partners and with the incumbent operators. There were lots of questions about how this can compete as a successful business against the incumbents who have all those unfair competitive advantages. It’s got to be sustainable on some level to attract private partners. And what does free really mean? What service to who at what times of the day. Can free services coexist with for-fee service? Free capex isn’t the whole story. You must consider the effects of opex when looking at this as well. What assets do you each bring to the partnership? What assets would the private sector bring, and what aspects would the public sector bring? The private sector brings network equipment, architecture and design, installation, wireless telecom provision, monitoring, managing, maintenance, customer service. Most of what we focused on was about the network infrastructure—all about public and private partnerships to make the infrastructure happen. But clearly the private sector can play a role in terms of devices, applications, financial backing and spectrum licenses as well, with licensed band WiMAX coming down the pipe. On the public side: local government access. Clearly, the subscriber base is a huge asset that the local government brings. Whether it’s municipal employees, offices, public Internet users are all major assets that are brought to bear. Vertical assets as well, and knowing how to run muni projects. Turn-key network provision, roaming revenue opportunities, location sensitive advertising. Lot of questions and concerns about what extent and control does the city have over this. Workshop 2B: Public-Private Partnerships Patrick Leary, Chief Evangelist, North America, Alvarion: We were looking at the challenges, roadblocks and opportunities for these partnerships. In terms of roadblocks, we came up with a whole bunch, and we winnowed those to three that everyone could agree with. One was fear and resistance bred from bad past examples, such as the Winstar, Telligent—and there’s a lot of that out there that requires a lot of education to overcome. The other was lack of knowledge in general. This is such a fast-moving industry, and there’s so much to learn that can be done on a wireless network because it creates a holistic environment that can leverage so many different applications, and that knowledge needs to be worked on. Another was incumbent and legislative resistance. In terms of opportunities, we came up with a bunch and were tasked to winnow that down to two. One was an opportunity to create affordable access and bridge the digital divide. Another was revenue generation, and what it really came out to be was creating operational efficiencies within the municipal environment. The other was enhancing the community image, which is important to elected officials, but also for the business people and the tax base in the community. In terms of overcoming the roadblocks: Educate, and quantify the benefits to the stakeholders, engage stakeholders to build community champions. Ensure that information is objective. Maybe they won’t believe me, but they will believe a consultant. Reference visits. In terms of incumbents, “don’t poke the beast.” One suggestion here was to mandate open access so that even the beast himself can get on that network if so inclined. Engage the citizen and business community to build advocacy and approach legislators with the threat of not making it to the next term. Limit the scope—don’t go for community access all at once. Start with public safety, for example. Finally, don’t own the network. Let someone in the private sector own it. When you approach the private sector, have a solid plan. Offer incentives. In terms of exploring opportunities, we did identify these affordable access and operational efficiencies, and community image. Workshop 3A: Community Consensus Building Richard Rotondo, Vice President, Marketing, Motorola: Who are we building consensus with? The city leadership—mayor, city council, city government—are very important when you consider that these networks can be driven anywhere from the bottom up or from the top down. No matter where the idea came from, there is still a lot of consensus building to be done. • City agencies are all typically constituents you want to build consensus with. • The incumbent telecoms—if you don’t build consensus with them, they can cause trouble from legislative and regulatory standpoint. If you can get them on board, you neutralize them as an adversary in that space. • Community leaders, educators, and regular citizens—how do you get them to support you and influence other groups you want to build consensus with?
How do you build consensus? You must identify the value for each constituent and agency and within the public. For example, the value proposition for the public schools in an area was much different from Catholic schools in the area. Both could find value, it’s just that it was very different. In addition to finding the value propositions, you’re going to need one on one meetings and personal lobbying with the city leadership. Getting grassroots support will also help with the city leadership. • Agencies: You’ll hear that they tend to act as silos and keep separate from the other agencies. Instead of focusing on differences, identify common needs to build consensus: “We both need access to remote databases.” • Incumbent Telecoms: Try to keep them from becoming adversaries. They do have a play in these municipal wireless networks. If they want to be a WISP on an open system, show them that there is a revenue play in the system, if you can. They’re afraid of getting cut out. If they do lose some margin, convince them they’ll make it up in volume. • The Public: Survey them. What do you want as a citizen in this community? It makes it easier to build consensus. Do demonstrations saying, Hey, this is what the Internet is, and this is what you can do with it. Actual, real demonstrations—letting people have hands on and seeing it—made the difference.
From a high level, communicate the vision and the benefits. Identify and create advocates and champions. Let the viral advocacy work for you. You’ve got to find and communicate the value props on an individual basis and find something for everyone. Lower the barriers to consensus: political, technical, financial. One thing to drive it is a pilot program to demonstrate the vision and give people a hands-on view. Workshop 3B: A Bay-Area-Wide Cloud Chuck Haas, Founder & CEO, MetroFi: We talked a little bit about complexity of such a deployment in the Bay Area: • Well over 1,000 square miles, • Approximately 7 million people, • Millions of households, • Different population densities—over 5,000 per square mile to zero, • Complexity of government entities, counties, cities, discussion of mass-transit authorities.
On the positive side of complexity, it’s an order of magnitude or two less than some of the alternatives, which is fiber to the home at $1,000 per home. So in the grand scheme in the GDP of the Bay Area, pretty small. Is it needed? It’s a good question, when today we don’t have citywide Wi-Fi in 99% of the Bay Area cities. We also talked about stakeholders, of which government is one. The connector in regional areas is transit—buses, trains. Standards, interoperability, authentication: These networks are going to be a patchwork, but residents shouldn’t have to reauthenticate when they cross a boundary. ROI, revenue models, roaming, and another great comment was that roads were an economic driver in the early 1900s. Wi-Fi is a disruptive technology and may dislocate existing services. Workshop 4A: What Are the Metrics for Success? Bert Williams, Vice President, Marketing, Tropos Networks: Which local government agencies would most benefit from wireless networks? We tried to identify what the roadblocks were and how to overcome them. How do you know if your successful? We started by identifying a large number of candidate applications that I think are the usual suspects. We didn’t talk much in the conference about meters and sensors. Across these networks you have multiple agencies, but they may be running a series of multiple applications, and don’t automatically assume all of them are data. There will be video surveillance, video and audio programming, and maybe even voice. The cost savings of moving voice onto a city wireless network would probably dwarf the cost savings from anything else. We ended up with four key application areas: • Public safety: police, fire, EMS, video surveillance, perimeter monitoring for sensors • Mobile field workers: public works, building inspectors, social services, tax collection • Meters and sensors: Automated meter readings and many other areas where municipalities need to monitor things remotely, and wireless is more cost-effective of mechanism than relying on wireline networks or cellular-based networks where there is a monthly service charge. Wells, water supply, sewer processing. • Education: Why does education have to be wireless? A lot of the things we’re talking about, e-books, school resources can be done over wireline. But we’re seeing a lot of digital divide situations where citizens are being offered free or low-cost computers. Maybe a walled garden approach.
Three Roadblocks: • Funding: A lot of this can be justified through cost reduction by cutting down on communication cost, indirect through efficiency, and limiting overtime and staffing. We’re seeing some ad-based revenue models where private providers are coming in and saying we’ll build the network because we think we can make a sustainable business of running ads on it. • Security and Reliability of the Network • Spectrum
The success metrics also surprised me in that they struck me as being a lot of qualitative metrics not directly related to citizen services. For example, some people said I’m going to be measured on reliability of the network, independent of whether the benefit the network delivers to citizens. Workshop 4B: Metrics and Motivations Nigel Ballard, Manager, Digital Inclusion, Intel Americas, State & Local Government: In our workshop we discussed why would a municipality do this? Reasons, pitfalls, advantages. We did come up with a couple of points that haven’t been covered so far. Roadblocks: • Existing power companies. Why? Broadband over power line. It’s an old horse but it still has some life left in it. Everybody has power. The electricity people think, this has to be the way to do it. But from the experiments I’ve seen, they haven’t managed to do it yet. • Political Forces: Keep your friends close, and your enemies closer still. The telecoms and cable companies have a lot to lose at the moment. They must have read the Google news with some terror. Let’s say Google wins. At 9:00 on Monday morning, everybody has free Wi-Fi. At 9:01 does everybody call and cancel? It’s right that they are worried because the argument they’ve always made, you shouldn’t do it, none of you should do it, you should leave it to us because we’re the experts. But they’re not doing it. The point was made that we’re now 16th in the world. We should be in the Top 5. Cities that do it for the right reason should be applauded.
I’ve spoken to a city that’s doing it because they want to read their power meters, but their initial intention wasn’t to let the public on the network. But I said to them, it’s like building an extra lane on the freeway in your city. You can speed around on your own freeway, but there will be a lot of times when there’s nobody on that extra lane. And even if there is, you’re selling the voters short in your city, and they’re the guys who put you where you are. It’s a perfect opportunity to rewrite the rulebook for access. We came to the conclusion that Wi-Fi is good, but not everybody agreed it should be free. If it’s free, people won’t perceive it as having any value. I like the idea of free access to everyone, but I don’t think Google will provide that. Maybe $10 a month is a reasonable amount to pay for Internet access. Workshop 5A: Multi-Service Offerings Michael Kleeman, Senior Technical Advisor, WAZMetro: We defined this as using a common network fabric to support a range of applications for a number of different user constituencies. We broke the applications into three areas. The obvious ones were traditional Web access, e-mail. When you think of a metro-area-wide network, there’s a series of applications that then become feasible. One is public safety, the ability to use a fabric to substitute for a traditional public-safety network at a fraction of the cost point with increased capacity is really quite interesting. The other is a series of fixed capabilities, surveillance networks, large sensor grids. And the other is the area of mobile. One thing that emerged is that, when you provide nomadic access, you alter the business practice of a city. When people are no longer tethered to a desk, you have the same ability to change the economics of a business, such as a city, the same way Federal Express did when they brought up their SMR network some 25 years ago. When 60 percent of the workers are field people, why do they have to come back to the office. An example application was “trouble ticketing,” where a citizen could do a trouble ticket on a city service and get a reply back. VoIP and broadband video surveillance were others. A second dimension was access control and policy management. How do you make sure users get what they are expecting from the service, and also whoever is providing the service is collecting the revenue they need to or is able to monitor and manage and control access to the network. The third dimension was security: It’s a radio-based network. How do you make sure it’s secure, and that it’s perceived to be secure? People need to be sure the data is not being misappropriated or perceived to be misappropriated. There were close to 70 applications discussed in the group, from trouble tickets to community Web sites on a localized basis. You put the fabric out there, and the individuals will use the tools available to create things that no one would anticipate. Different user groups have different needs, and at some point they are going to collide. It’s a shared medium, and the more and more it gets used, the more risk that people will start stepping on each other. Finally, there is a risk of too much success. What if there is too much VoIP and then you have the problem of the collision of the commons. Q&A Chris Vein, Senior Advisor for Technology to Mayor Gavin Newsom, City of San Francisco: Free isn’t the issue anymore, it’s what we can do with it. I put that out there. Patrick Leary: it’s not really free, because the cost is transferred somewhere else, such as an a la carte pricing model. I think you’ll get away from all-you-can-eat pricing models just for the pipe itself. Bert Williams: Free never really is. There’s going to be a cost somewhere, either through a subscription, or because it’s an amenity to a place where you’re doing business, or because you have to look at advertising to get the service, or your paying for it with your tax dollars. The capex is getting low enough so that people can afford to put this network in such that they gain a benefit from it so that they don’t have to charge a capex or an opex. I live in SF and can get free Wi-Fi today. At Pope and Vallejo, I can pay $6 at Starbucks, or I can go to Divana and I get it with a cup of tea and they give me a key. Paul Butcher: It depends on what point in time you look. I would say that nothing is free. The realities are that the mass-producing silicon engines that are out there are driving the cost of these networks down. Just as an AP is now $50, so too will be the cost of the network infrastructure. We all know the equipment cost of a network is minimal compared to the ongoing support cost. So in summary, somebody has to bear the cost of that support. That can be done in advertising clicks, services that can be done more efficiently, but somebody has to pay for the other end of the telephone line.
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