www.entrustsol.com February 23, 2024
Fiber to the Premise Feasibility Stud y
For: City of Burbank , CA
February 8, 2024
ATTTTTT
ATTTTTT
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Contents
Executive Summary ................................ ................................ ................................ .. 5
1. Asset Inventory and Assessment ................................ ................................ .......... 9 Existing Fiber Infrastructure ................................ ................................ ............ 9 Utility Poles ................................ ................................ ................................ 11 California Statewide Middle Mile Broadband Initiative (MMBI) ................. 13
2. Broadband Market Assessment ................................ ................................ .......... 15 Broadband Coverage and Speeds ................................ ................................ . 15 Incumbent Internet Service Providers ................................ ............................ 19 Fixed Wireless Access (FWA) ................................ ................................ ....... 24
3. Gap Analysis ................................ ................................ ................................ ..... 27 Competition Gap ................................ ................................ ........................... 27 Upload Speed Gap ................................ ................................ ....................... 28 ACP Participation Gap ................................ ................................ .................. 30
4. Survey Results ................................ ................................ ................................ .. 31
5. Conceptual Network Design ................................ ................................ ............... 33
6. Financial Feasibility Analysis ................................ ................................ ............. 35
7. Risk Analysis ................................ ................................ ................................ ..... 39 Competitive Risks ................................ ................................ ......................... 39 Financial Risks ................................ ................................ ............................. 40 Other Risks ................................ ................................ ................................ .. 40
8. Funding Opportunities ................................ ................................ ........................ 41 Existing Federal and State Funding Opportunities ................................ .......... 41
9. Business Case and Pro Forma ................................ ................................ ........... 45
10. Alternatives ................................ ................................ ................................ ....... 49 Option A – Citywide FTTP Public -Private Partner ship (P3) .............................. 49 Option B – Smaller network, lower risk ................................ .......................... 50
11. Conclusion ................................ ................................ ................................ ........ 52 ATTACHMENT 1
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Figures
Figure 1 – Conceptual FTTP network design ................................ .............................. 6 Figure 2 – 20-year projected financial performance ................................ .................... 8 Figure 3 – High strand count fiber routes ................................ ................................ ... 9 Figure 4 – Low strand count fiber ................................ ................................ ............ 10 Figure 5 – City owned utility poles in Burbank ................................ .......................... 11 Figure 6 – Example Burbank neighborhood utility pole infrastructure ......................... 12 Figure 7 – California Statewide Middle Mile Initiative (MMBI) Network ....................... 13 Figure 8 – Percentage of units served by 250/25 Mbps ................................ ............. 16 Figure 9 – Sample Addresses checked for service validation ................................ .... 17 Figure 10 – Spectrum coverage map ................................ ................................ ....... 20 Figure 11 – Cable Hybrid Fiber -Coax Architecture (HFC) ................................ .......... 21 Figure 12 – AT&T fiber coverage map ................................ ................................ ...... 22 Figure 13 – AT&T's local telephone and wired broadband service areas. ................... 23 Figure 14 – Fixed wireless network illustration ................................ ......................... 24 Figure 15 – Verizon coverage map ................................ ................................ .......... 25 Figure 16 – T-Mobile coverage map................................ ................................ ......... 25 Figure 17 – Fiber served areas vs. lower/middle income areas. ................................ 28 Figure 18 – Households with no high -speed upload option ................................ ........ 29 Figure 19 – Survey results summary ................................ ................................ ........ 31 Figure 20 – Conceptual FTTP network ................................ ................................ ..... 33 Figure 21 – Risk reward continuum ................................ ................................ .......... 39 Figure 22 – Estimated 20 -year financial performance ................................ ............... 45 Figure 23 – Estimated annual direct network operating expenses .............................. 46 Figure 24 – Estimated annual indirect busin ess expenses/operational costs .............. 47 Figure 25 – 20-year debt service ................................ ................................ ............. 47 Figure 26 – Total revenues ................................ ................................ ..................... 48 ATTACHMENT 1
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Tables
Table 1 – City of Burbank FTTP financial model overview ................................ ........... 6 Table 2 – ISP availability at sample addresses across Burbank ................................ 18 Table 3 – Summary of Burbank ISP offerings ................................ ........................... 19 Table 4 – Fixed wireless service levels ................................ ................................ .... 25 Table 5 – Backbone and distribution laterals distances for the conceptual network .... 34 Table 6 – Number of premises passed by the conceptual network ............................. 34 Table 7 – Total network construction and operation cost estimates under different take rate scenarios ................................ ................................ ................................ ........ 36 Table 8 – Estimated backbone capital expenses ................................ ...................... 37 Table 9 – Estimated distribution laterals capital expenses ................................ ........ 38 Table 10 – FRF Allocations ................................ ................................ ..................... 42 ATTACHMENT 1
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Executive Summary
EN Communications, formerly Magellan Advisors , now part of the ENTRUST Solutions Group, was commissioned to evaluate the feasibility of the City of Burbank ’s Water and Power utility offering Fiber to the Premise (FTT P) internet service to homes and businesses . The goal of a feasibility study is to evaluate the likelihood of success in different scenarios . The study assessed five general factors : available as sets, current state of the market, funding available, infrastructure requirements, including a conceptual design, and estimated costs and revenue potential. The conclusions, recommendations, and results presented here are intended to assist leadership to deci de how to move forward with the enterprise.
The city owns and operates an extensive fiber network and utility -grade pole infrastructure throughout the city that can readily support an FTTP network. Using these assets, ENTRUST designed a citywide conceptual F TTP network ( Figure 1). Our 20-year financial model to build and operate this network , using current construction costs, operational costs, staffing requirements and borrowing costs under a variety of scenarios , estimated a construction cost of $128.5 million. We estimate t he operation of this network over 20 years will cost $131.8 million.
The model indicates that a citywide FTTP enterprise is feasible under reasonable assumptions about subscriber take rate, product price point , and borrowing costs , listed in Table 1, along with total addressable market, cost estimates for fiber infrastructure and network electronics, and projected operational costs, and revenues over 20 years. Feasibility is not a guarantee of success but rather an indication that success is possible. Substantial financial, competitive, and other risks exist that must be considered when deciding whether to enter the retail internet service business.
A key metric is the number of paying customers needed for the financial results shown.
This is expressed as p rojected uptake , also referred to as ‘ Take Rate ’. It is expressed as a percentage of the total number of similar units (households or businesses). In order to serve the city as a whole, the network must be constructed to pass all premises, a portion of which will take service. In this model, 30% of households and 35% of businesses must take service to achieve financial sustainability.
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Network
Hubs Distribution
Fiber Backbone
Fiber City
Border
Figure 1 – Conceptual FTT P network design for the City of Burbank Table 1 – City of Burbank FTTP financial model overview Element Amount
Demand and Take Rate Assumptions
Households 44,978
Projected Uptake 30%
Estimated Subs (Based on 44,978 Passings) 13,494
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Element Amount
Businesses 7,096
Projected Uptake 35%
Estimated Subs (Based on 7,096 Passings) 2,484
20-Year Projected Capital Expenses
OSP Construction Costs $73,700,165
Premise Drops $45,958,899
Network Equipment/Refresh, Systems, Project Mgmt. $6,731,477 Building Improvements $915,917
General Equipment/Other Capital Expense $1,234,630
Total $128,541,088
20-Year Projected Operating Expenses
Network Operations $72,957,307
Selling, General and Administrative (SG&A) $58,919,834
Total $131,877,141
Funding and Debt Service
Capital Expense to be Funded $105,568,897
City Contribution $0
Net To Be Funded $105,568,897
Projected Interest Rate 5.50%
Total Principal $105,568,897
Total Interest $62,773,548
Total $168,342,445
Projected Working Capital Needed $0
Interest (based on 15-year term @ 5.50%) $0
Total $0
20-Year Projected Revenue $280,402,567
20-Year End-of-Year Cash $2,033,426
Outside plant (OSP), the physical fiber optic cables, conduits and infrastructure forming the network and connect ing customers , are estimated to generate $128.5M in capital expenses over 20 years . Operating expenses come from maintain ing, manag ing, and marketing the infrastructure and services , including staff ing and systems . These will be approximately $131.9M, including $73M in network operations costs and $59M for sales , general , and administrative (SG&A) .
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Figure 2 – 20-year projected financial performance for Burbank FTT P The total revenues for the City of Burbank FTTP are projected to exceed operating costs in year four of operations, as shown in Figure 2, and net income becomes positive in year 11. By the end of 20 years, the enterpri se should generate annual free cash flow of approximately $5M.
$(10,000,000)
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Net Income Revenue Total Operating Expenses Interest Payments ATTACHMENT 1
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1. Asset Inventory and Assessment
Existing Fiber Infrastructure
With an eye towards serving city needs, electric utility needs and the needs of major businesses in the film and television industry , the city has been building fiber for more than twenty years and has an extensive network. Figure 3 shows the city’s existing high -count fiber network.
Figure 3 – High strand count fiber routes
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Staff have indicated that, at a minimum, all fiber routes have 20% fiber capa city . Thus, the map shows 20+ strands of available fiber city -wide. Existing dark fiber presents opportunities for immediate construction. Existing aerial fiber presents opportunities for upgrading fiber to add strand count or over lashing new fiber along the existing routes.
Existing underground fiber in conduit presents opportunities for replacement to upgrade strand counts or co -location where conduit capa city allows.
Additional lower strand count fiber routes and easements exist throughout the city that may provide other opportunities when designing the FTT P network. These network segments are shown in Figure 4 below.
Figure 4 – Low Strand Count Fiber
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Utility Poles
The city owns and maintains 11,466 utility poles that are used for power distribution throughout the community ( Figure 5). These poles provide an extremely valuable infrastructure that can be leveraged for broadband deployment – utilizing poles to string aerial fiber optic cables and distribute into homes and businesses without having to excavate new underground conduit networks. The city’s poles are in alley -facing , street -facing , and back -of-lot locations .
Figure 5 – City owned u tility poles in Burbank
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Compared to alternative methods such as underground cabling, the use of existing utility poles for broadband deployment generally has a lower cost and environmental impact. Service providers (including the city) can easily attach fiber optic cables or wireless equi pment, expediting connectivity to new areas. The cost -effectiveness is particularly advantageous in areas where underground construction may be prohibitively expensive or impractical. Maintenance and repairs can be carried out more efficiently on utility p oles, minimizing environmental disturbances. The City of Burbank’s poles appear to be well maintained and are distributed uniformly throughout the city as shown by the neighborhood example in Figure 6 below.
Figure 6 – Example Burbank neighborhood utility pole infrastructure Conduit and poles can and do hold fiber -optic cable as it runs along streets and roads.
The public easements or rights -of-way (RoW) along those roads may be the most valuable assets, along with other public property. Access to these assets can make widespread access to high -speed con nectivity more feasible by accelerating the deployment of the requisite digital infrastructure at the lowest possible cost.
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California State wide Middle Mile Broadband
Initiative (MMBI)
The State of California has been very active in designing and implement ing broadband policies to expand broadband availability and digital literacy in the state. Governor Newsom addressed the need for improved broadband services in Executive Order N - 73-20,1 issued on August 14, 2020 . The legis lature responded by pass ing Senate Bill 156 that put $6B for broadband in the 2021 budget , including $3.25B for t he State wide Middle -Mile Broadband Initiative (MMBI ) Network. The MMBI is well underway, with portions of the network planned to pass through the City of Burbank parallel to the I -5.
Figure 7 – California Statewide Middle Mile Initiative (MMBI) Network
1 See , https://www.gov.ca.gov/2020/08/14/38666/
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The anticipated routing of the MMBI in Burbank will provide a public -access fiber infrastructure that can provide the city a long -haul data transport access to data centers and internet exchanges in Los Angeles, San Jose, and elsewhere.
Traditionally, these long -haul transport routes would n eed to be leased from private organizations. Additionally, the MMBI can be utilized to complete local network loops to ensure the city network’s redundancy without having to construct and install new routes, creating cost savings. The construction of the MMBI will provide both cost savings and enhanced network reliability for the city’s fiber optic backbone .
Worth noting is that the city already has redundant middle mile network connections to provide service to existing O NE Burbank customers and city faci lities. The quickest and most cost effective way to connect the FTTP network to middle miles services will be to upsize these existing connections.
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2. Broadband Market Assessment
ENTRUST ’s staff analyzed the broadband landscape of Burbank to determine the options available to residents and businesses . The data collected here was sourced from company websites, survey data and discussions with the service providers. We focused on internet speeds and pricing from commercial internet service providers (ISPs) , esp ecially “facilities -based carriers ” that own physical infrastructure, such as fiber, copper, coaxial cables, satellites, wireless radios, and other wireless infrastructure such as towers. Key findings were:
• Charter Communications / Spectrum Cable is the do minant ISP . o Provides gigabit service to 95% of city addresses .
o Competitive pricing
• AT&T provides DSL and fiber services .
o Symmetrical gigabit provider
o Fiber network is limited – 35% city coverage and expanding . o Competitive pricing
• T-Mobile and Verizon offer cellular based home internet services . o Affordable option
o Speeds and availability vary widely
• Alternative carriers including satellite and fixed wireless providers are present in the market but do not represent a competitive offer ing to FTT P.
Broadband Coverage and Speeds
According to the F ederal Communicat ions Commission (FCC) Broadband Map , virtually all locations within the city can receive 1000Mbps / 35Mbps (downstream/ upstream ) service via Spectrum’s cable network . Areas with AT&T fiber service can reach speeds of 5000 Mbps / 5000 Mbps . The availability of at least 250Mbps / 25 Mbps service is shown in Figure 8.
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Figure 8 – Percentage of units served by 250/ 25 Mbps 2
2 Source: FCC National Broadband Map
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Address Validation
As part of ENTRUST’s research validation process, the “actual” services available to randomly selected addresses from different parts of the area were checked against the latest version of the FCC Broadband M ap. The percentage of addresses served by a particular ISP anecdotally validates the map data showing where a particular ISP’s servic e is available. The locations sampled are shown in Figure 9 and detailed in Table 2 below .
Figure 9 – Sample A ddresses checked for service validation ATTACHMENT 1
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Table 2 – ISP availability at sample addresses across Burbank Address
ATT
DSL
ATT
Fiber
Spectrum
Cable
Verizon
FWA
T-Mobile
FWA
Starry
FWA
Hughesnet
Satellite
SpaceX
Satellite
N Lincoln St, Burbank, Ca 91506 x
x x x
N Frederic St Burbank, Ca 91504 x
x x x
x x
S Kenneth Rd Burbank, Ca 91501
x x
x
x
S Glenoaks Blvd Burbank, Ca 91502
x
x
x x
W Providencia Ave Burbank, Ca 91502 x
x
x
x x
W Elm Ave Burbank, Ca 91506 x
x
x
x x
N Niagara St Burbank, Ca 91504 x
x
x
x x
E Verdugo Ave Burbank, Ca 91501 x x
E Olive Ave Burbank, Ca 91501 x
x
x x
E Providencia Ave Burbank, Ca 91501 x
x
x x
N Cordova St Burbank, Ca 91505 x
x
x
x x
N Valley St Burbank, Ca 91505 x
x x
x x
N Parish Pl Burbank, Ca 91504 x x x x x
x x
W Empire Ave Burbank, Ca 91504 x
N Niagara St Burbank, Ca 91505
x
x x
x x
Jolley Dr Burbank, Ca 91504 x
x
x
x x
Note: Street numbers omitted for privacy purposes.
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Incumbent Internet Service Providers
Burbank’s internet service market i s a typical duopoly with an incumbent cable company , Charter/Spectrum , and an incumbent phone company , AT&T , dominating the market. Spectrum offers cable service with gigabit download speeds throughout the city . AT&T is upgrading their DSL infrastructure to fiber on an incremental basis. AT&T DSL download speeds top out around 7 0 Mbps , while areas served by AT&T fiber can get symmetrical speeds of up to 5 Gbps . Wireless options, while offered by large companies, have limited availability and market share at present though this share will likely grow in the future as Verizon and T -Mobile continue to upgrade their networks and improve service availability. With AT&T’s limited fiber footprint , many parts of the city only have one option for giga bit services which is Spectrum.
Table 3 – Summary of Burbank ISP offerings
ISP Tech
Download
Speed
Upload
Speed
Contract
Term MRC
City
Coverage
Charter
Spectrum
Cable
200 Mbps 10 Mbps
1 year
$ 40*
95% 500 Mbps 10 Mbps $ 60*
1 Gbps 35 Mbps $ 70*
AT&T
DSL 5-70 Mbps 0.25-0.5 Mbps None $ 45 80%
Fiber
300 Mbps 300 Mbps
None
$ 55
35%
500 Mbps 500 Mbps $ 65
1 Gbps 1 Gbps $ 80
2 Gbps 2 Gbps $ 110
5 Gbps 5 Gbps $ 180
Astound
(Digital
West)
Fiber
100 Mbps 100 Mbps
2 years
$ 25
1% 500 Mbps 500 Mbps $ 45
940 Mbps 940 Mbps $ 65
1 Gbps 1 Gbps $ 80
T-Mobile Wireless 182 Mbps 35 Mbps None $ 50*** 50%
Verizon Wireless 50 Mbps 10 Mbps None $ 25** 50%
300 Mbps 50 Mbps $ 60**
Starry Wireless 200 Mbps 200 Mbps None $ 50**** 5%
*Indicates promotional rate that will increase in the future **$99 setup fee and additional bundled products may be required ***As low as $30 when bundled
**** Starry recently entered Chapter 11 Bankruptcy Protection June 2023 ATTACHMENT 1
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Charter Communications
Charter Communications is the cable provider in Burbank via their Spectrum services .
It offers download speeds up to 1 gigabit to 95% of the city (See Figure 10). They are the largest cable company in the USA with revenues near $50 Billion per year. Th ey have close to 32 million residential subscribers and over 2 million small and medium business customers, illustrated in Figure 10.
Figure 10 – Spectrum coverage map 3
Their residential offerings are a consumer -grade service using their existing cable -TV hybrid -fiber -coax (HFC) network (see Figure 11). The downstream rates offered are
3 FCC Fabric Data
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100’s of Mbps to 1.2 Gbps. The upstream rates are below 50 Mbps for even the highest downstream offering. All rates are “up -to”, as the HFC network’s total available bandwidth is shared amongst 250 to 500 homes per node. The actual performance will vary depending on the time of day and number of active users on the network.
Figure 11 – Cable Hybrid Fiber -Coax Architecture (HFC) Spectrum, and the cable industry in general, has an upgrade path to multi -gigabit services with a technology called DOCSIS 4.0. New equipment at the headend (main local network node for cable companies) and customer premises equipment ar e required for advanced features and speeds. Thus, the upgrades will likely be concentrated initially in the more competitive markets. Many of the required upgrades are part of a general plan to push fiber closer to the homes and eliminate as many costly a nalog amplifiers as possible .
The issue for Burbank, given Spectrum’s large national footprint, is when they will have an upgrade in their area. DOCSIS 4.0 won’t be available until 2025 -2026 and will be rolled out based on many factors including the competitive fiber from the incumbent telco. Spectrum takes a regional approach and will likely upgrade the entire Southern California region at once. This is anticipated but has not been announced.
AT&T
AT&T is the incumbent telephone company in large portions of L os Angeles County including Burbank . They offer fiber and DSL internet service to 95% of the city. Fiber internet service up to symmetrical 5 gi gabit speeds is available in 35% of the city ATTACHMENT 1
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(Figure 12). DSL is available in the rest of the city with download speeds up to 70 Mbps.
Figure 12 – AT&T Fiber coverage ma p4
AT&T is essentially SBC (Southwestern Bell Corporation) which bought AT&T Long Distance years ago and kept the well -known AT&T brand name. SBC also bought fellow Incumbent Local Exchange Carrier s (ILEC s) Pacific Bell, Ameritech , and Bell
4 Source: FCC Fabric Data , CostQuest
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South. As a result, AT&T provides local wired broadband and telephone service to much of the USA, as depicted in Figure 13. They also have a nationwide mobile network and are deploying a great deal of fiber to support towers and small cells as they expand their 5G coverage.
Figure 13 – AT&T's local telephone and wired broadband service areas 5.
For Internet service , they have historically invested in Digital Subscriber Lines (DSL) technologies which enable data services over their installed base of copper phone wires. The data rates supported by DSL depend on the length of the copper wire and the type of DSL deployed. To increase data rates AT&T has deployed limited fiber to select street cabinets and neighborhood pedestals.
Their yearly capital budgets may be measured in the tens of billions of dollars but this must be spent throughout their footprint and across all their business lines including for national 5G rollouts. AT&T is investing and actively expanding their fiber footprint
5 Source: att.com
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within the City of Burbank with service currently available to approximately 35% of the city . Timeline for complete fiber conversion within the city is unknown.
Fixe d Wireless Access ( FWA )
In recent years, mobile network operators (MNO) T -Mobile and Verizon have offered internet access to homes and businesses using their 5G networks to deliver a point -to- point wireless connection to individual locations (See Figure 14). Data rates will depend on several parameters, including distance from the tower and foliage density.
Figure 14 – Fixed Wireless Network Illustration
The concept of wireless internet access is not new, and it is widely used in rural environments. What has changed is the MNOs' impact in denser urban and suburban markets they serve. T -Mobile and Verizon are the most aggressive in mark eting their FWA services and have added over 3 million FWA customers nationally. AT&T is entering the FWA market in unison with their C -Band 5G deployments but does not have a significant presence in Burbank as of this report.
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Figure 15 – Verizon coverage Map –
speeds vary 6
Figure 16 – T-Mobile coverage Map –
speeds vary 7
Table 4 – Fixed Wireless Service Levels
ISP Tech Max Download
Speed
Max
Upload
Speed
Contract
Term
Monthly
Rate
T-Mobile Wireless 182 Mbps 35 Mbps None $50***
Verizon Wireless 50 Mbps 10 Mbps None $25**
300 Mbps 50 Mbps $60**
Both Verizon and T -Mobile are offering home internet services over their cellular infrastructure. Because speeds and availability vary widely, a neighborhood near a core tower site may have terrific speeds during parts of the day that drop off during peak periods while a neighbor two blocks away on t he other side of the street can’t subscribe to the service at all. Wireless home internet is a product to be aware of as it can be cost competitive with wireline offerings. However, the reliability of speeds, and availability due to terrain and the built e nvironment make this product generally
6 Source: FCC Broadband Map
7 Source: FCC Broadband Map
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uncompetitive with fiber and cable -based products except for customers who are seeking the lowest possible price point . It is assumed that, as these carriers continue to roll out 5G and future 6G access points that this product will improve. The maps above indicate where these companies can provide service, however, when reviewing our sample service availability (see Table 42 above), you’ll notice that the services available do not match their advertised service areas (see Figure 15 and Figure 16 above) .
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3. Gap Analysis
Burbank is considered ‘served’ under the federal definition of 100 /20 Mbps to all addresses in the city. Charter Spectrum is the dominant ISP, providing gigabit service to 95% of city addresses. Due to these factors , Burbank is unlikely to qualify for federal grant funds to pay for a public FTTP network. There are , however, gaps in competitive options that create opportunities for a public fiber project :
• 65% of the city lacks fiber or other high -speed alternative s to cable . • Existing pricing from incumbent providers is higher than similar markets due to lack of competition .
• Customer dissatisfaction with incumbent providers ’ pricing and service indicates a willingness to switch if other options were available .
ENTRUST’s analysis also found gaps in:
• The competitive environment
• Upload speeds
• Participation in affordability programs
Competition Gap
The city has fiber service available to approximately 35% of households leaving 65% of the city with access to only a single gigabit provider. This lack of choice leads to higher prices, greate r dissatisfaction, and generally lower quality service due to the uncompetitive environment. Moreover, when reviewing fiber -served locations, it becomes clear that lower income areas of the city have been excluded to date from fiber investment. This means that lower income areas are stuck with lower speed and higher price -per-megabit services.
Lack of investment depresses property values, limits opportunities and access to services in these neighborhoods and exacerbates the digital divide. AT&T is the incu mbent fiber provider in the City of Burbank. They continue to upgrade legacy copper customers to fiber across the country, including in Burbank but cannot provide a timeline for full build -out within the city . Thus, this gap is likely to persist for an extended period absent governmental intervention. Figure 17 illustrates the ATTACHMENT 1
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neighborhoods with fiber. Note the lack of fiber, particularly within the yellow shaded areas that indicat e a lower income area .
Figure 17 – Fiber served areas vs. lower/middle income areas .8 Upload Speed Gap
Sixty-five percent of the city has no option for high -speed uploads. This limits options for remote workers in many industries who rely upon moving large files including editors, animators , and digital artists that are the workforce driving Burbank’s creative industries. Advancing cable te chnologies are on the horizon with upgrades likely to
8 Source: FCC Broadband Fabric Data and Public Income data ATTACHMENT 1
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begin addressing this problem on a national level beginning in 2026. Like AT&T, Charter/Spectrum expects to make these upgrades in the city when they become viable and available, but the timeline is unk nown. Thu s, this gap is likely to persist for an extended period absent governmental intervention. Areas in Figure 18 with black dot s do not have access to high -speed uploads from any provider. Cable technology anticipated to deploy in 2026 will close this gap. The upload speed gap is a competitive opportunity to improve take rate in areas without fiber today.
Figure 18 – Households with no high -speed upload option shown in black 9
9 Source: FCC Broadband Fabric Data
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ACP Participation Gap
By April 2024, the federal government will be ending the Affordable Connectivity Program (ACP). This will disenfranchise millions of people across the country who will no longer be able t o afford their broadband service. In Burbank, federal data shows that 30% -50% of eligible households currently participate in ACP. This means several thousand households could be paying lower prices for their internet service if they chose to op t into the program resulting in savings of $30 -$75 per month. Often, this non-participation is due to lack of awareness of the programs or a household’s eligibility for them.
Recipients of any social support services such as SNAP/EBT and free /redu ced lunch program s are eligible. All ISPs operating within the city today offer access to th is upon request by providing eligibility information. This is an issue that could and should be addressed by the city through improved education and out reach programs. Alternative low-cost programs are currently available through individual ISPs and likely will be offered again by the federal government in some form . Residents should be encouraged to talk to their provider as this program comes to an end in early 2024 .
The need for ACP and similar programs indicates an affordability gap that will only grow with the end of the program. At present, there is no way for city government to force an ISP to offer lower prices. If a public ISP existed, the ISP could decide to offer a reduced -price product to customers in need.
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4. Survey Results
While the City of Burbank generally has broadband internet service available througho ut the city, residents remain frustrated with cost, performance, and lack of competitive options. Speed and reliability were indicated as the most important source of frustration , but price was the greatest source of dissatisfaction among respondents.
The target rat e, based on the respondents’ stated willingness to pay, is $70 to $75 per month for gigabit service, or less than $0.08 per Mbps per month. In our experience, $0.30 per Mbps per month is a competitive rate, although it is substantially less in some places. 10
Figure 19 – Survey Results Summary
Respondents indicated paying Charter, the dominant provider, an average of $0.85 per Mbps per month , over ten times their target rate. Survey results showed Burbank residents paid AT&T, the o ther provider in an effective cable -telco duopoly, an average of nearly $2.00 per Mbps per month. The lowest rate in the market was for Starry fixed
10 For example, Chattanooga EPB, a leader in municipal broadband, offe rs 1 Gbps service for $68/month and 10 Gbps for $300/month, which equates to $0.07 and $0.03 per Mbps per month.
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wireless, which barely met the California standard for broadband, at four times the target rate. Respondent s are currently paying much more than they feel is reasonable for an internet service, especially for lower speed services which have much higher per Mbps costs.
Current demand for services other than the internet appear limited. Well over half of responde nts had fully “cut the cord” for video, getting all their video content from streaming services. There appears to be pent up demand among less technology - intensive households. They have devices and desire to connect but face issues with basic availabili ty and cost. Many households have evidently chosen slower connections with lower recurring costs but higher costs per Mbps. Gigabit speed services appeared across the map, intermingled with much slower services. Therefore, there are either islands of fiber -based service and/or people are opting for lower performance service due to the cost.
It should be noted that survey respondents seem to be more affluent and more educated than the overall population. Therefore, households with lower incomes are under -represented in these results. It is reasonable to believe the conclusions from this research would apply even more strongly to those households. Therefore, the issues may be understated: demand for faster, more economical, more reliable service is likely greater than is evident in our survey results.
The general conclusion is that Burbank has adequate broadband services that are comparable to what is available in any other mid -sized city . As is common, the dominant internet access is cable. Both the incumbent cable and telephone companies make fiber -based connections available at a premium. Various smaller providers, including cellular companies, have a minimal presence in the market. Overall performance and costs for internet access in Burbank were comparable to other places with broadband duopolies, but they fell short of what can be considered nationally competitive and of what your residents demanded.
Comprehensive survey results and methodology can be found in the survey assessment memo .
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5. Conceptu al Network Design
A conceptual fiber to the premise network (FTTP ) was designed to connect all addresses to a redundant core network or backbone . In this design, t he city’s existing fiber is utilized to serve as backbone and portions of the distribution network . The blue lines represent the new construction distribution network laterals running fiber that pass all known addres ses within the City of Burbank. The red lines are the network backbone based largely on existing Burbank fiber.
Network
Hubs Distribution
Fiber Backbone
Fiber City
Border
Figure 20 – Conceptual FTTP Network
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The conceptual network consists of 223 miles of underground and aerial fiber passing more than 52 ,000 locations within the city as detailed in Table 5 and Table 6.
Table 5 – Backbone and distribution laterals distances for the conceptual network Item Total Buried Aerial
Backbone
Footage 219,623 163,168 56,455
Mileage 40 30 10
Distribution Laterals
Footage 1,207,236 123,373 847,958
Mileage 183 23 160
Table 6 – Number of premises passed by the conceptual network Premises Count
Total 52,129
Residential 45,020
Business 7,096
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6. Financial Feasibility Analysis
ENTRUST has created a financial model for the City of Burbank . A sustainable broadband operation , for the purposes of this study, is defined as an enterprise that is, at a minimum , cash flow neutral over 20 years considering all build out, operations and financing costs over that time period .
To build out the backbone and distribution network as a whole, the capital expenditure is estimated at $128.5 million . This price includes c ustomer premise electronics (CPE) and costs to connect individual service locations (premise drops ) adequate to reach financial sustainability.
The model , based on similar projects and industry data show that the city should plan for a 30% take rate as a ba seline scenario . This means that core network will be built to pass all homes and businesses of which , on average, 30% will need to become customers of the network . This 30% take rate is the minimum that the enterprise needs to achieve to reach financial sustainability. This will vary with conditions across the city . In neighborhoods where there is no fiber service, take rates may jump to 40% or 50%. In areas where there is an existing fiber service from AT&T, they may drop to 10%-15%. Thirty percent is a n achievable penetration rate when averaged across the city and is what’s necessary to reach financial sustainability .
The pricing assumptions are driven by successful projects around the country as well as results from the community survey that showed that a majority of respondents were interested in gigabit service at a $70 per month price point.
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Table 7 demonstrates the take rate needed to achieve network sustainability under these assumptions and provides some context to how the costs change as the number of customers grows or shrinks .
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Table 7 – Total network construction and operation cost estimates under different take rate scenarios Component
Amounts for Scenario
1 2 3 4 5
Households 44,978 44,978 44,978 44,978 44,978
Projected Uptake 20% 25% 30% 35% 40%
Estimated Subs (Based on 4 4,978 Passings) 8,994 11,243 13,494 15,742 17,991 Businesses 7,096 7,096 7,096 7,096 7,096
Projected Uptake 25% 30% 35% 40% 45%
Estimated Subs (Based on 7,096 Passings) 1,776 2,130 2,484 2,835 3,195 20-Year Projected Capital Expenses
OSP Construction Costs $73,700,165 $73,700,165 $73,700,165 $73,700,165 $73,700,165 Premise Drops $30,978,278 $38,468,705 $45,958,899 $53,437,177 $60,947,842 Equipment and Systems Refresh $6,731,477 $6,731,477 $6,731,477 $6,731,477 $6,731,477 Building Improvements $915,917 $915,917 $915,917 $915,917 $915,917 General Equipment/Other CapEx $1,234,630 $1,234,630 $1,234,630 $1,234,630 $1,234,630 Total $113,560,467 $121,050,894 $128,541,088 $136,019,366 $143,530,031 20-Year Projected Operating Expenses
Operations $72,957,307 $72,957,307 $72,957,307 $72,957,307 $72,957,307 SG&A $55,336,179 $57,128,529 $58,919,834 $60,707,625 $62,506,531 Total $128,293,486 $130,085,836 $131,877,141 $133,664,932 $135,463,838 Funding / Debt Service
Capital Expenses to be Funded $98,228,651 $101,900,078 $105,568,897 $109,235,800 $112,915,715 City Contribution $0 $0 $0 $0 $0
Net To Be Funded $98,228,651 $101,900,078 $105,568,897 $109,235,800 $112,915,715 Projected Interest Rate 5.50% 5.50% 5.50% 5.50% 5.50%
Total Principal $98,228,651 $101,900,078 $105,568,897 $109,235,800 $112,915,715 Total Interest $59,918,944 $61,346,695 $62,773,548 $64,200,222 $65,631,232 Total $158,147,595 $163,246,773 $168,342,445 $173,436,022 $178,546,947 Projected Working Capital Needed $0 $0 $0 $0 $0
Interest (based on 15 -year term @ 5.50%) $0 $0 $0 $0 $0 Total $0 $0 $0 $0 $0
20-Year Projected Revenue $190,684,821 $235,556,762 $280,402,567 $325,160,062 $370,196,791 20-Year End -of-Year Cash ($78,481,110.90) ($38,216,988.98) $2,033,426.50 $42,196,464.98 $82,615,611.45 ATTACHMENT 1
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To serve the entire city , some costs are unavoidable . The backbone and distribution networks are two of these costs. The cost estimate for the backbone network is shown below. Existing fiber is utilized for the backbone resulting in substantial cost savings over new construction .
Table 8 – Estimated backbone capital expenses
Item Total Buried Aerial
Design
Footage 219,623 163,168 56,455
Mileage 42 31 11
Premises 3
Residential
Business
Anchor 3
Labor Costs
Buried $ 425,584
Aerial $ 277,364
Wireless $ 0
Splicing $ 129,619
Patch Panels and Cabinets $ 3,142
General $ 0
Labor Total $ 835,710
Materials Costs
Fiber $ 0
Underground $ 278,537
Closures $ 79,508
MST $ 0
Patch Panels and Cabinets $ 66,623
Aerial $ 28,912
Aerial - Strand/Lash $ 50,850
Wireless $ 0
Material Total $ 504,432 Per Foot Per Mile
Total Bid $ 1,340,143 $ 6 $ 32,222
With 20% Contingency $ 1,608,172 $ 7 $ 38,667
The cost for the distribution network l aterals to facilities, businesses , and residences is shown below. Some existing network is utilized for distribution , but the majority is new construction. Again, the city’s extensive utility pole network enabl es an aerial fiber deployment resulting in massive savings over underground construction or the cost to deploy poles in the first place . The project would be infeasible without this infrastructure .
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Table 9 – Estimated distribution laterals capital expenses Item Total Buried Aerial
Design
Footage 971,331 123,373 847,958
Mileage 184 23 161
Premises 52,129
Residential 45,020
Business 7,096
Anchor 13
Labor Costs
Underground - Buried $ 13,155,496
Aerial -Strand/Lash $ 17,413,819
Wireless $ 0
Splicing $ 19,593,885
Patch Panels and Cabinets $ 1,204,414
General $ 0
Labor Total $ 51,367,616
Materials Costs
Fiber $ 1,653,173
Underground $ 1,174,619
Closures $ 4,197,460
MST $ 0
Patch Panels And Cabinets $ 4,218,987
Aerial $ 429,412
Aerial - Strand/Lash $ 763,175
Wireless $ 0
Material Total $ 12,436,830 Per Foot Per Mile
Total Bid $ 63,804,447 $65 $346,819
With 20% Contingency $ 76,565,336 $78 $416,183
The remaining capital costs cover all additional equipment needed to complete and operate the network including, but not limited to: core and premise network electronics, drop fiber to connect premises to the distribution network , new data center hubs to house network electronics as well as things like vehicles, splicing equipment, software licenses and more .
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7. Risk Analysis
Our study indicates that FTTP in the City of Burbank is feasible under certain assumption s. S ubstantial risks are involved. Some can be controlled for. Others may be unavoidable.
This study models a ‘Full Retail’ type of broadband enterprise. The costs , including debt obligations and other associated risks remain vested with in the city . The financial rewards, public involvement in decision making , and operational control are some of the benefits realized by taking on this enterprise . Figure 21 shows where this endeavor falls on the Risk/Reward continuum in relation to other paths the city might choose to take. It’s worth noting that t he city’s current fiber enterprise, O NE Burbank , sits between the ‘Business -only Retail Broadband Service’ and ‘Wholesale Transport’ business types on this diagram.
Figure 21 – Risk Reward Continuum
Competitive Risks
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potential take rate by marketing aggressively and campaign ing directly against Burbank’s project. They may o ffer price cuts and new incentives . They may also accelerate investments in fiber (AT&T) and the roll out of D OCSIS 4.0 (Charter/Spectrum) nullifying advantages that exist today . Marketing will be challenging as the city ’s competitors are national brands with decades of experience in hundre ds of markets. MDUs represent a special cha llenge and make up more than half of the resident ial unit s in Burbank . Installing wiring and electronics to serve within a privately owned building requires additional negotiations and permission s from the building owner .
Financial Risks
The project will require substantial borrowing of more than $100 million to construct the network and finance operational losses as the project builds towards profitability in year
20. Failure to achieve adequate market penetration will cause the network to operate at a loss in perpe tuity requiring general fund cash infusions to prop up the enterprise or force a sale of the business unit .
Unanticipated costs to r epair and replace damaged infrastructure due to wildfires, earthquakes , and other natural disasters must be considered for al l broadband endeavors, especially those in Southern California. Routine maintenance costs are included in the model. Disaster recovery is not.
Other Risks
Non-performance of the network could expose city officials to political and reputational risk . Other municipalities engaged in these efforts have dealt with well -funded campaigns from citizen and industry groups in opposition to a new public enterprise.
This will happen in Burbank if the city chooses to embark on this enterprise and must be anitic ipated .
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8. Funding Opportunities
There are many programs to support broadband development offered by federal and state government s. Burbank’s demographics and current broadband penetration indicate that the city is u nlikely to receive support from these programs . The scenario modeled does not rely on external funding assuming targeted prices and take rates are met. However, all funding avenues with potential to support this effort should be explored.
Existing Federal and State Funding
Opportuniti es
The American Rescue Plan Act (ARPA, P.L. 117 -2) created new programs and allocated $360 billion in funds of which broadband is an eligible use.
ARPA State and Local Fiscal Recovery Fund (FRF)
ARPA created the State and Loc al Fiscal Recovery Fund (FRF), allocating $350 billion to state, local, and tribal governments nationwide to support their response to and recovery from the COVID -19 public health emergency. Internal city conversations indicate that while the city has ARPA funds, they are unlikely to be allocated to support broadband.
The funding and programs are administered by the U.S. Treasury. As of June 2022, all funds have been delivered to the recipients. FRF funds must be committed for expenditure by December 31, 2024, and expended by December 31, 2026.
Among the eligible uses of FRF are three classes of infrastructure projects: broadband, water, and sewer projects. The T reasury’s Final Rule, effective April 1, 2022, significantly broadens eligible broadband infrastructure investments to address challenges with broadband deployment, access, affordability, and reliability. Within the broadband space, there are three eligibl e uses of FRF funds:
• Middle -mile projects
• Last -mile projects
• Match for later broadband grant programs
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Funding allocations were determined by the U.S. Treasury, reserving the following amounts:
Table 10 – FRF Allocations11
Recipient Class
Amount
($ billion) Description
States and D.C. $195.3 Treasury -defined allocations
Counties $65.1 Treasury -defined allocations
Metropolitan Cities $45.6 Treasury -defined allocations Tribal Governments $20.0 Allocations to each federally registered tribe Territories $4.5 Treasury -defined allocations
Non-Entitlement Units
of Local Governments $19.5
Distributed through the states to small cities,
towns, and other municipalities with populations
under 50,000. Allocations are determined by each
state
Total $350.0
By reserving some FRF funds for allocation as match for later, anticipated grant programs, using FRF funds would reduce the need for any municipal, city , state, or tribal entity to deplete either its capital or operating budgets for grant matching. There are two points important points to remember :
1. Local governments (counties, cities, towns) and tribal entities can also apply to their states for a portion of statewide Fiscal Recovery Funds (FRF). Contact your state capital to determine if any FRF funds rema in uncommitted.
2. If the county has not yet committed to or reserved all FRF allocated to your jurisdiction, please consider keeping some unallocated in reserve for use as matching funds on future broadband infrastructure deployment project grants.
Those gra nts could be direct from the federal government or through states (e.g., future BEAD subgrants).
Future Federal Broadband Fundi ng
The Infrastructure Investment and Jobs Act (IIJA, P.L. 117 -58) made an unprecedented amount of funding available to plan for and deploy broadband infrastructure. Over $47 billion in funding has been allocated to the U.S. Department of Commerce’s National
11 US Treasury Dept.
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Telecommunications and Information Administration (NTIA) and the U.S. Department of Agriculture’s Rural Utilities Service (RUS), dedicated to broadband deployment. In addition, IIJA allocated to NTIA another $2.75 billion nationwide to improve digital equit y and digital inclusion initiatives.
Broadband Infrastructure Deployment Funding
In May 2022, NTIA published a funding announcement for the Broadband Equity, Access, and Deployment Program (BEAD), offering $42.45 billion in funding. The funding announceme nt provides an unprecedented opportunity for states to build out last -mile networks for telecom and electric utilities, cooperatives, independent telecom providers, and local and tribal governments. Grant funding opportunities from the states using their f unds will be available starting as early as the first half of 2024. NTIA announced funding allocations to the states in June 2023; those allocations were based on unserved and underserved households, and other objective data. All states have committed to p articipating in the BEAD program.
When the initial statewide mapping and planning phases are completed , and a five - year statewide plan has been developed, the plan will be submitted to NTIA. Once NTIA formally approves the state’s plan, BEAD funds will be released to the state. At that point, the state will offer competitive grant programs to eligible entities. State plans were submitted to NTIA by no later than September 30, 2023.
By December 31, 2023, State Initial Proposals were submitted to NTIA. Once NTIA approves this initial proposal, 20% of the BEAD funding will be released to the state.
This is expected in the first half of 2024. Once funding is received, the state’s broadband office can begin issuing solicitations for BEAD subgrants. The remaining 80% of BEAD funding will be released after the submission of the state’s final proposal, which is due one year after receipt of the first tranche of funding.
RUS will also issue the f ifth opportunity announcement (FOA) for the Rural eConnectivity (ReConnect) Broadband Loan and Grant program shortly . The FOA will offer almost $1 billion, and this new solicitation will be announced in the first quarter of 2024.
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Burbank is unlikely to be eligible for BEAD or RUS f unding as both programs have a rural mandate . Broadband funding opportunities are included here t o ensure that they are not overlooked when seeking money for this enterprise.
Digital Equity and Digital Inclusion Funding
NTIA also published a Notice of Funding Opportunity (NOFO) for the Digital Equity Act (DEA), offering $2.75 billion for states to improve and fund digital equity and digital inclusion initiatives. NTIA is currently developing funding allocations based on n eeds among the states . All states have committed to participating in the DEA program.
When the initial statewide planning phases are completed , and a five -year Statewide Plan has been developed, the plan will be submitted to NTIA. Once NTIA formally approv es the state’s plan, DEA funds will be released to the state. At that point, th e state may offer competitive grant programs to eligible entities.
FCC’s E -Rate Program
The FCC's E -Rate Program makes telecommunications and information services more affordabl e for schools and libraries. With funding from Universal Service Administration Corporation ( USAC ), E-Rate provides approximately $4 billion for up to 90% discounts for schools and libraries, based on the poverty level of the schools. ONE Burbank currently provides internet service to Burbank schools at a lower cost than E -Rate would provide .
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9. Business Case and Pro Forma
ENTRUST created a business case with the following assumptions :
1. Fiber network, network equipment, and customer premise equipment are all paid for by project revenues .
a. Depreciation i s not factored into net income.
2. 30% take rate for residential units and 35% for businesses.
3. 5 years to build the network.
4. Monthly prices to end users :
a. Residential: 1 Gbps $ 70/month ( 75%), 500/500Mbps $50/month (25%) b. Businesses: 1 Gbps: $1 50/month (75%), 250/250 Mbps $60/month $(25%)
c. Anchors excluded : ONE Burbank serves this market .
Using these assumptions, a 20 -year plan was developed that show s the network will be financially sustain able when these targets are achieved .
Figure 22 – Estimated 20-year financial performance for Burbank FTTP $(10,000,000)
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
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Figure 22 above illustrates relative cash flows over the 20 -year model period. Figure 23 and Figure 24 below illustrate annualized expense breakdown for net work and business operations respectively. These expenses are a ssumed going forward after the initial construction and ramp up period is complete in year 5. Figure 25 shows the debt service carried by the enterprise and retired in year 20. Figure 26 is total annual revenues over the 20 years modeled. The full pro forma is in a separate attachment labeled appendix A.
Figure 23 – Estimated annual direct network operating expenses The majority of the ongoing expenses are in staffing for operating the network and the business. The staffing estimate assumes 1.5 Full -Time Employees ( FTEs) in year 1,
11.5 FTEs in year 2 and 25 FTEs for years 3 and beyond. Maintenance includes network equipment, outside plant , and fleets. Staffing salaries have been adjusted for Southern California and include estimated fully burdened costs at 135% of salary. $2,612,095
$138,269
$229,500
$61,200
$37,454
$93,750
$11,000
$3,030
$80,800
$63,682
$7,187
Direct Staffing
1-Network & Headend
Maintenance
2-OSP Maintenance (1K per mi)
3-Facilities Maintenance
4-Utilities
13-Software Maintenance (15%
of purchase)
17-Vehicle Maintenance (% of
purchase cost)
18-Direct Internet Access (DIA)
19-10GB Ethernet Transport
29-Pole Fees, if Aerial (per pole
annual)
30-Miscellaneous
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Figure 24 – Estimated annual indirect business expenses/operational costs
Figure 25 – 20-year debt service
$2,077,183
$504,504
$26,803
$10,721
$12,000
$32,164
$21,443
Indirect Staffing
2-Sales and Marketing Startup
(first 2 yrs)
3-Ongoing Sales/Mktg (2% gross
rev; yr 3+)
4-Professional & Legal Fees
5-Travel & Entertainment
Expense
6-Reporting & Compliance
7-Office Expense
8-General Overhead
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Principal Payments Interest Payments
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Figure 26 – Total revenues
$-
$101,430
$920,383
$3,860,335
$9,039,571
$13,517,862
$15,452,493
$16,155,784
$16,483,477
$16,817,103
$17,156,900
$17,503,653
$17,858,025
$18,218,806
$18,586,480
$18,963,276
$19,346,725
$19,737,910
$20,137,507
$20,544,848
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
YEAR
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10. Alternatives
This report is a feasibility study for a citywide fiber to the premise (FTTP) enterprise .
As the city debates whether to pursue this endeavor, two alternatives should be considered as well .
Option A – Citywide FTTP Public -Private
Partnership (P3)
As modeled above, this report illustrates a path to su stain ability for a citywide FTTP network assuming certain targets are met , and risks assumed. Option A involves the city pursu ing all of the same goals with a private partner internet service provider (ISP). The city can engage in an RFP process to find a private ISP to partner with .
A partnership contract would detail all city goals including requir ing the partner to build and pay for all network assets needed to pass all addresses and serve the entire city, requiring the partner to assume all debt , requirin g the partner to offer particular services at particular prices and so forth. The city’s contribution to the partnership would be the use of the existing fiber plant on a leased basis for the project . The city could introduce any number of requirements to ensure performance, public oversight , and ongoing participation in the network rollout and operations through regular partner and city staff meetings, public reports to citizen advisory committees, and other contractual obligations .
Pursuing the FTTP enterprise as a partnership has a number of benefits: elimination of debt obligations that could jeopardize borrowing for other city capital projects, tapping into existing expertise and resources within the private partner instead of staffing up to build these capabilities from scratch at the city, moving performance risk to the partner and off of the city just to name a few . This will only be possible if the partner believes they can build a profitable enterprise . The partner may review the project and realize that they can build or operate for less than the city could by leveraging existing operations , access to capital or other resources thus lowering the overall project costs and time to pr ofitability .
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It would cost the city very little to have exploratory conversations with potential private partners. Cities all over California are engaged in these conversations now . If there are no suitable partners, the city can always re turn to the orig inal concept or consider option B . Keep in mind, time is of the essence . ISP competitors continue to expand fiber and move closer to cable upgrades that will be challenging to compete with . If the city spends too much time pursuing a partnership, the windo w for a new city fiber ISP may close .
Option B – Smaller Network, Lower Risk
City FTTP projects often get built on an incremental basis over many years in a similar manner to O NE Burbank . Today, the city has an extensive fiber network that passes approximately 30% of neighborhoods. The cost to build neighborhood laterals off this existing plant is relatively small and would allow the city to do some pilot projects to understand whether or not a full city build is worth undertaking.
Many of the neighborhoods passed lack fiber service and would likely be interested in the city’s offering . This could drive take rates upwards of 40-50% in these pilot neighborhoods . The city may be able to begin building this out with existing BWP and ONE Burbank staff substantially reduc ing up-front investment and time to market. This approach does reduce financial ris k at the outset of the project .
In the end, if a citywide fiber network is to be built, it will cost the same . The upside here is that costs may be better managed with expansion being driven by grassroots neighborhood pre-sales where a given neighborhood must commit to a certain take rate before the city will build to them guaranteeing the city reve nues to ju stify the build cost . A few words of c aution : This option does not guarantee service throughout the city which may be antithetical to the city and utility’s mission .
The city will undoubtedly receive citizen pushback when certain neighborhoods get built and others do not. This option tips your hand to your competitors potentially spurring price cuts and accelerated upgrades and installations that may make it harder to get the city project to profitability. This is not necessarily a negative outcome . A number of cities have engaged in pilot FTTP projects specifically to spur investment and speed up fiber roll outs by the incumbent ISPs just by threa tening to be a new competit or.
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City of Burbank Fiber to the Premises Feasibility Study Page 52 www.entrustsol.com February 23, 2024
Perhaps the best reason to consid er this option is that it is a logical ‘Phase I’ to the main concept modeled in this report; a good first step to test out build costs , operational assumptions and connect some customers . If it’s working, continue to build out. If it’s not well received or there are too many headwinds, it was only a pilot project that can be wound down.
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City of Burbank Fiber to the Premises Feasibility Study Page 53 www.entrustsol.com February 23, 2024
11. Conclusion
The City of Burbank is better positioned than most communities to offer their residents a fiber -based internet servi ce. It has extensive fiber and pole assets to leverage , operational experience in O NE Burbank , and a large customer base to tap into.
Residents clearly want other, more economical options. Our analysis finds that it is possible under some sce narios for a municipal broadband enterprise to self -finance without the city spending general or utility funds on the endeavor. Substantial risks are involved. Fierce competiti on from the incum bents an d from new players should be expected. The project will require substantial borrowing of more than $100 million hoping to build towards profitability in year 20. Our market analysis indicates t he competitive environment could allow for a new fiber ISP to enter the market today , but that window may close as the incumbents continue to ex pand and upgrade.
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