CITY OF BURLINGTON

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CITY OF BURLINGTON BURLINGTON TELECOM

• BACKGROUND
• PHASE I - CITY NETWORK
• PHASE II FIBER TO THE BUSINESS, FTTB
• PHASE III FIBER TO THE HOME, FTTH
• CURRENT INITIATIVES
• CHECKLIST

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Burlington Telecom Background

• Located in Burlington, VT.
• Burlington is a municipal of approximately 18,000
  Homes and 2500 Businesses.
• In 1997, Burlington citizens voted for a
  municipal fiber network, but the City needed to
  change its municipal charter.
• Driven primarily by citizens wanting an
  alternative to Adelphia (now Comcast).

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• In 1999, Burlingtons municipal electric company
  (BED) partnered with Aptus Networks to build a
  city wide fiber to the home network.
• On March 7, 2000 Burlington voted to change the
  charter and approved 6.1 million in revenue
  bonds. It was subsequently approved at the State
  level.

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• Then the dot-com bubble burst and investors began
  to shy away from telecom projects.
• On April 8th, 2001 both the City and Aptus missed
  their deadlines to raise initial funds.
• Facing an uncertain future the City changed its
  approach and hired experienced telecom
  professionals.
• In 2002, Burlington Telecom (BT) was formed and a
  three phase plan was developed to fully wire the
  City of Burlington.

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Who is Burlington Telecom?

• A Department of the City of Burlington.
• 60 years of operational experience in the
  telecommunications industry.
• Employees previous experience - New York
  Telephone, Verizon Wireless, Independent Phone
  Companies, CLEC, ISPs and power utility.
• Previous FTTx overbuild experience.
• Capital investment and financial modeling
  experience.
• Secured 14M USDA/RUS Loan.

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Phase I City Network

• Phase I Connected 38 Government offices with
  LAN, internet, and voice services on a 16.5 mile
  fiber-optic network at a price tag of 2 million.
• City of Burlington issued a bid for funding.
  KOCH Financial Corp won the bid and the City
  entered into municipal capital lease arrangement.

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• The City contracted for wholesale voice services
  with TelCove, a PA-based CLEC.
• Burlington switched its nearly 1,000 City Verizon
  lines over to a BT/TelCove network at a cost
  savings of 35.
• Total estimated savings for the City was 150,000
  per year.
• At the end of Phase I, the city was able to
  terminate multiple internet contracts and issue a
  single bid for internet access for the entire
  city.

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City of Burlington Fiber Hub
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Phase II FTTB Network

• No backing from the General Fund (Taxpayers) or
  City Assets.
• The City will own the network at the end of the
  payment schedule of 15 years.

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• In 2004, the Phase II buildout added a few,
  carefully selected large businesses to the
  network. State Vt. Dept. of Health, Community
  Health Center of Burlington, Burlington Housing
  Authority.
• BT utilized fiber deployed in the Phase I build
  and only incurred an incremental cost of hookup.
• This was successful because BT already had an
  anchor tenant ITSELF!! (1000 lines and internet
  bandwidth).

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Planning for Phase III What should the network
design be???Broadband Test.

• If the connection cannot provide consumers access
  to carrier class voice, two way high-speed data,
  and high definition video services over the same
  connection, then it is not a true Broadband
  connection

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A brief summary of technology

• xDSL
• HFC
• Wireless

• BPL
• FTTx

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xDSL

• DSL (Digital Subscriber Line or Loop) A phone
  companys answer to Broadband.
• Many varieties Most common is ADSL
• ADSL - Asymmetrical provides higher downstream
  speed and lower upstream.
• VDSL2 Latest DSL innovation Symmetrical High
  Bandwidth - Severe distance limitation Need
  fiber optics into each neighborhood.
• All DSL uses copper telephone wire.
• Service quality easily impacted by environmental
  factors.
• Poor or no service on older cable plant.

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HFC

• HFC (Hybrid Fiber-Coaxial) A Cable Companys
  answer to Broadband.
• Modern digital cable television systems use fiber
  transport from the video/data source to an
  optical node located in a neighborhood. Coaxial
  cable runs from the node to the customer.
• DOCSIS (Data Over Cable Service Interface
  Specification) data and internet access.
• Current version is 2.X with a maximum bandwidth
  is 40 Mbps down and 30 Mpbs up.
• Bandwidth is shared amongst customers in the same
  geographic area.
• This creates QoS (quality of service) issues and
  bandwidth cannot be guaranteed.
• As with other metallic cable, coax is susceptible
  to interference thus degrading service.

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Wireless

• Uses radio waves (RF) as its carrier to link the
  subscriber.
• Great potential for interference.
• Antenna needed.
• May use licensed or unlicensed frequencies.
• WiFi utilizes an unlicensed frequency and can
  easily be disrupted.
• Coverage distance is very limited.
• Dependable coverage is difficult if not
  impossible within certain terrains.
• Hills, trees, buildings and other line of site
  obstructions can limit availability.

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BPL

• BPL Broadband over PowerLine
• BPL uses electrical distribution lines, overhead
  or underground.
• Requires modifying the power grids with
  specialized equipment.
• Only works on low and medium voltage side of
  grid, requires fiber optic cable to feed.
• Limited bandwidth capability.
• Still requires a large fiber investment.

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The BPL Controversy

• The Controversy Radio Interference
• Power lines are not designed to prevent radiation
  of RF energy.
• BPL is an interference source for all radio
  services using this frequency range.
• Radio operators have petitioned the FCC to
  intervene.

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FTTx

• Fiber-To-The-Home/Premise (FTTx) BTs answer
  to broadband.
• FTTx is the only architecture that can deliver
  all of today's services, while retaining the
  capability to quickly and easily deploy emerging
  applications and services.
• Unmatched reliability.
• Proven flexibility to accommodate rapid changes
  in service delivery demands.
• Unparalleled bandwidth scaling.
• Fiber is future proof by eliminating the need for
  costly plant upgrades and enhancements in support
  of new applications.
• Price points are competitive with copper,
  reaffirming that fiber is the obvious choice for
  new construction.

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How Fast is Fiber
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• Network Design Plan
• Next Generation Technology
• Limitless, Future-Proof Fiber
• Next Generation Telephone Switch with tried-true
  analog service
• IPTV unlimited channel capacity
• Incumbents Compete with Verizon Comcast using
  gear that meets today's service requirements
  while leveraging better technology and customer
  focus.

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• Strategy
• Select and Build the cornerstone The Fiber
  Optic Cable Infrastructure.
• Build the system with a fiscally disciplined
  approach.
• Support the initial deployment of the fiber and
  all other network assets with a sustainable
  customer base.
• Make a long term commitment to the community by
  constructing a quality network with superior
  services and unmatched customer service.

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Independent Industry Analysts Agree

• The Passive Optical Network (PON)
  Fiber-to-the-Home (FTTH) architecture selected
  offers substantial future-proofing, and the team
  is familiar with and has considered important
  design and deployment trade-offs and options.
  Wireless technologies are likely to complement
  fiber in some situations . . . but they cannot
  rival fibers capacity and longevity. Dr.
  Marvin Sirbu, Carnegie Mellow University, Dr.
  William Lehr, Associate at Massachusetts
  Institute of Technology, and Ms. Sharon Gillet,
  Associate at Massachusetts Institute of
  Technology.
• I have reviewed the technical plan to deliver
  service and have a high degree of confidence that
  the plan is the right one, the equipment selected
  is correct, and most importantly the people in
  charge of these decisions are very talented and
  capable. Jeff Allen, CEO of Third Rail. Review
  of FTTx deployed in Burlington, VT

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Phase III FTTH Network

• Due diligence, BT hired Osborne Associates of
  Burlington, VT to conduct a market survey to
  determine receptivity to a city-owned
  telecommunications network.  Questions involving
  pricing, usage and satisfaction of current
  providers were also asked.  The market survey
  provided BT with invaluable direction as the
  business plan was being written.
• In Nov. 2004, after the demonstrated success of
  Phase I and Phase II, KOCH Financial agreed to
  provide the 20 million for phase III with
  another 15 year repayment schedule.

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The Challenge

• The City had its certificates to carry voice and
  internet traffic. The challenge came when it
  applied for its Certificate of Public Good (CPG)
  to carry video.
• Adelphia (Comcast) challenged BT in State court
  on its ability to provide this service as well as
  cross-subsidies from other City departments and
  City Hall.

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Adelphia Legal Challenge

• Result BT successfully defended its position
  after 8 months of testimony and was granted its
  CPG to distribute CATV.
• Adelphia could not prove our lack of expertise.
  Actually BT knew more about IPTV than they did.
  Also they could not prove any cross-subsidies
  from other City entities.
• How did BT win the cross subsidy argument?

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Adelphia Legal Challenge

• BT acted as a private corporation a complete
  overbuilder!!
• BT applied for all the appropriate certificates.
• BT applied for pole attachments as a licensee.
  Even though Burlington Electric Department (city
  owned power utility) was joint owner of all the
  poles.

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Adelphia Legal Challenge

• BT completed make ready rides (pole inspections)
  with Burlington Electric, Verizon and Adelphia.
• BT paid for all make ready work to prepare the
  pole for our attachments.
• BT has paid for all its dig permits through the
  Department of Public Works.

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Network Construction Started OSP Construction
Spring 2005 Main Hub (Central Office) Renovation
Inside and Out (7/11/05)
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Network Reliability Back-up power systems
meeting current telecom standards
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Next Generation Switch Traditional POTS
service or VoIP or BOTH. Analog POTS, T1 PRI, VoIP
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IPTV Headend 180 video channels, VOD and 45
digital music channels via MPEG-2. virtual
unlimited channel capacity
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GPON Access SONET Industry standard and
accepted technology meeting FITL, Telcordia, and
ITU requirements.
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Fiber Rich 120 Fiber Capacity in City 1x32
Splits and large aggregation points give BT 100
utilization on GPON gear.
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As of January 2006

• BT completes CATV headend.
• BT secures content contracts with approximately
  100 providers.
• 72 of the content contracts are aggregated
  through National Cable Television Coop (NCTC).
• IPTV created issues with content providers due to
  their perception of the lack of security of
  transmission of the signal.
• BT transmits over a closed fiber optic system,
  but we still had to provide them with assurance
  of encryption.

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Service Rollout

• February, 2006 BT rolls out tripleplay services
  available to approximately 1800 residents.
  Residents also have doubleplay and single play
  choices.
• August, 2007 BT hits 2000 subs.
• February, 2008 BT has overbuilt approximately 150
  distribution fiber miles with services available
  to 15,400 residential homes and 1200 businesses.

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Accomplishments to date Built a FTTH Network from
the ground up!

• Turned-up Next Gen Switch and trunks with both
  TDM and VoIP capabilities.
• Turned-up IPTV headend with 180 video and 45
  digital music channels, VOD. Managed all DRM
  (digital rights management) and encryption
  issues.
• Built an ISP with diverse carriers.
• Established 3 node OC-48 ring between Verizon CO,
  City hub, and BT CO.
• Established 2 node SONET ring to serve the New
  North End (2nd town)
• Negotiated over 5500 pole attachments.
• Built past 15,411 homes with fiber.
• Provide services to over 2800 customers via GPON.
• Provide service to Burlington International
  Airport and it tenants.

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Current Initiatives

• HD and DVR Rollout Spring08.
• Increase Commercial Sales Efforts.
• Reassess Business Plan, focusing on Cost of Goods
  Sold, Margin Analysis, and the development of
  better sales metrics.
• Increase focus on improving our Customer Services
  Group to ensure customer retention and
  up-selling.
• Improve our installation Quality Assurance
  Program.
• Improve data acquisition during the installation
  and repair process to increase operational
  efficiencies.

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Burlington Telecoms New Bundles
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FTTX ChecklistEngineering and Construction

• Know your Municipal turf and demographics. Build
  in the most dense areas to start.
• Do not abandon the basic engineering principles
  (i.e. Customer Serving Areas).
• Layout and plan realistic Make-Ready Schedules.
  The other utilities have their own timelines.
• Stay disciplined, plan the work and work the
  plan!!!
• BE HUMBLE It is best to follow the rules of
  construction as one deals with other utilities
  and not claim you are the Municipal and we can do
  what we want (i.e. pole attachments). They will
  slow you down!!

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FTTX ChecklistRegulatory and Legal

• Know your Local and State regulations.
• Know your competitors Cable, Voice and
  Internet. They will come after you. Remember you
  are a public entity swimming in traditionally
  private shark infested waters!!
• Video - understand DRM (digital rights
  management) and encryption requirements, and the
  costs associated with acquisition.
• Content acquisition and management. Know how
  your network design and contracts with carriers
  can affect content acquisition.

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FTTX ChecklistHuman Resources

• Do not outsource the core design and build of
  your network.
• It is estimated that BT has saved approximately
  30 in costs over the length of the project by
  bringing the expertise in house.
• Have an aggressive sales program while at the
  same time managing the customer expectations
  during the build. At the beginning revenue is
  always trying to catch up to capital
  expenditures.
• Regulatory and Legal issues can consume a lot of
  man hours. Identify who will be doing this and
  the cost.

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FTTX ChecklistOverall

• Need to have an appetite for a large Capital
  program. Usually a 5 to 7 year Return On
  Investment.
• What is the contingency plan to increase revenue
  and/or capital if there is a shortfall? Do you
  know your Cost of Goods Sold, Churn, and Margins
  on your service offerings?
• Remember the Fiber Cable is the largest part of
  your CapEx program but most importantsize your
  cables for future demand. Electronics come and go
  the fiber will be there for the next 100 years.
• Build the network in incremental, fiscally
  disciplined phases. Is the schedule realistic
  based on your Make-Ready work.
• Build the right capacity the first time!!!!

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THANK YOU!
www.burlingtontelecom.com