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HomeMy WebLinkAbout2010-0719 Study Session MIN CITY COUNCIL STUD Y SESSION July 19. 2010 Page I of3 MINUTES FOR CITY COUNCIL STUDY SESSION Monday, July 19,2010 Siskiyou Room, 51 Winburn Way Mayor Stromberg called the meeting to order at 5:32 p.m. in the Siskiyou Room. , Councilor Silbiger, Navickas and Chapman were present. Councilor Jackson arrived at 5:35 p.m. Councilor Voisin arrived at 6: 1 0 p.m. Councilor Lemhouse was absent. ' 1. Look Ahead Review City Administrator Martha Bennett reviewed the items on the Council Look Ahead. 2. Does the City Conncil have any qnestions regarding the Ashland Fiber Network Strategic Bnsiness Plan that staff plans to propose for adoption on Augnst 3, 2010? Information Technology Director Rob Lloyd provided history on the business plan process and a presentation on the proposed 2010-2013 AFN Strategic Business Plan that included: Timeline. . I 120 IO-Council adopts AFN plan goal . 3/20 I 0 - IT Director starts; Process begins . '4-5/2010 - Meetings with stakeholders . 5-7/20 I 0 - Research; Planning; Reviews . . 7/20 I 0 - Presentation to Council . 8/20 I 0 - Planned adoption by Council Summary Status . AFN wholesale model viable for :9 years . Cost and price pressures straining utility Overhead, debt, personnel, C;ompetitive rates Bandwidth usage . Important economic development role . Refinancing bond would not be productive Options 1. Sell or Outsource AFN Financial performance hurts price Value of assets is not high Outsourcing likely worse 2. Reorganize on a Revenue-centric Model Differentiate on product and community role Not wholly direct retail Keeps partners but changes role Create channel to offer and sell more services Direction: Reorganization . Strategic Priorities Financial viability Cover entire community Community resource Pay share of bond debt and internal costs Operating Formula . AFN = Municipal telecommunication Utility . Revenue:::: Operating + Capital + Debt . Work Breakdown I. New Internet Bandwidth Contract CITY COUNCIL STUD Y SESSION July 19, 2010 Page 2 of3 2. New Cable Television Contract 3. Replace Partner Agreements with Contracts 4. Implement AFN Max Wireless Service 5. Updated Website 6. Emergency Notification System 7. Free Community Connect Service (remote to network and deploy through WI Max) Staff and Council discussed offering free internet service at a slower speed or requiring a nominal fee. The City could not afford to provide free hook up service but could charge an installation ,free with a rebate if the customer upgrades. Staff eliminated AFN Bronze and will no longer offer that dial-up alternative. An option under consideration was offering one-week subscriptions for high speed to visitors. Turnaround: Financials . New Revenues + Controlling Costs - AFN Revenues per Customer Graph Turnaround: Market Share . For core business, grow from 41 % to 53% - AFN Internet Market Share Graph Turnaround: Debt Share . Large increase in Share of Bond Payment . Dependant on Improved Financials Staff explained the General Fund and Utility Fund covers whatever debt AFN does not contribute. Citizens pay for AFN through property taxes and utility rates and currently there were 1,300 citizens unable to access it. Turnaround: Potential New Products for Consumers and Businesses (All AFN) . High-Speed Wireless (provided by AFN) . IP-Based Telephony (partner driven solution) . . PC Support and Backup Storage (not offered due to cost) . IP Television (AFN could offer but was considered high risk) . Security (AFN might be able to offer through bundling) . Website and Online Store Development/Hosting (AFN could provide this using stackable services) . In-Store Wireless for Customers (was unknown if this would require working with partners or not, the price variant would be speed) . Applications (has potential to make more revenue - AFN would compete on product versus price) Turnaround: Summary . Focus on Increased Revenues and Lower Costs . Community Connect Service . Positive Financials - Infrastructure and Debt . Lock in Debt Share . Must Start Quickly Internet bandwidth contract to Council on 7/20 Community Connect in implementation planning Emergency Notification System in chartering Cable Television contract planned for 9/2010 Partner contracts planned for 11/20 I 0 Staff noted AFN achieved major savings on the internet bandwidth contract by reducing costs more than half. AFN cost structures were higher than competitors that could rely on national networks and had the scale to provide better pricing. Transit and connection costs for Ashland were more because of its rural location although those costs were decreasing. The $150 cost of the Wi Max antenna required for connectivity was a drawback but there were ways to help offset costs. Some ISP's have offered to cover a portion of the antenna cost. Key Feedback CITY COUNCIL STUDY SESSION July 19, 2010 Page 3 of3 . Overall Strategy: Business Model and Options . Community Connect Service . Relationships with Partners . Rates . Pressures from Stakeholders . Improving Public Sentiment Staff explained the new internet bandwidth contract would support higher speed internet although some customers may have to replace their modems. AFN will offer services on the website with directions on upgrading and possible discounts through virtual. bundling. The Emergency Notification System would be a marketing tool. Council discussed concerns offering free service would cost the City money, requires more support and was limited to a small group of people. Charging a nominal fee was reasonable and could be adjusted if costs were not covered. Supportive comments for free service noted the promotional opportunity, it was community oriented and would generate a positive attitude. Council suggested offering vouchers for the Wi Max antenna, providing the Emergency Notification System free and a special deal for individuals to get connectivity to AFN. Staff responded the Emergency Notification System was usually a one-time log on and not enticing enough for individuals to disconnect from competitors and clarified Wi Max was a 3-5 year temporary solution. The projection over the next three years was AFN would have 1,300 new customers. Staff further clarified that outsourcing was a good idea but there were fixes that needed to occur now in order to progress to selling or franchising in the future. Council and staff discussed the recommendation to maintain existing relationships with ISP for the next 1-3 years and the pros and cons of running AFN like a utility. Running AFN as a utility would require ramping up staff to support the service and those costs would increase as revenue did. Councilor Jackson left the meeting 7: 19 p.m. Council consensus agreed the business model staff presented was a good approach for the next 1,2 years. Council did not support offering the free internet access staff suggested under Community Connect Service and thought free service at a slow 'speed would not compete. Council suggested promotions that would subsidize the antenna or offer normal speed service to people who could not previously get it. Other suggestions included a rate tier structure and payment plans or special promotions for purchasing modems. Council consensus agreed to maintain the current relationship with the partners' and that the rate structure needed revising. Mayor Stromberg thought a one'page summary of the AFN plan would be helpful in fielding questions from the ISP's, the Budget Committee and contingencies regarding Pressure from Stakeholders. Council expressed concern on the lack of skills and slow turnaround that occurs having Council as the executive board. Staff will establish an advisory board from other municipal fiber groups to create a feedback mechanism to assist Council with recommendations and process. Meeting adjourned at 7:40 p.m. , Respectfully submitted, Dana Smith , Assistant to the City Recorder