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HomeMy WebLinkAboutStaff Report 156-07FOR EARLY REVIEW, PLEASE RETAIN FOR MARCH 5 COUNCIL MTG City of Palo Alto City Manager’s Report TO: FROM: HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE:MARCH 5, 2007 CMR: 156:07 SUBJECT:REQUEST FOR COUNCIL DIRECTION ON OPTIONS CONCERNING CITYWIDE ULTRA-HIGH-SPEED BROADBAND SYSTEM REQUEST FOR PROPOSAL (RFP) RESPONSES REPORT IN BRIEF At Council’s direction, a Citywide Ultra-High-Speed Broadband System RFP was issued on September 27, 2006. The City received two responses: one from DynamicCity and one from 180 Connect Network Services, Inc. Although each vendor met basic requirements in the RFP, 180’s proposal was more comprehensive and more in alignment with the public/private model outlined in the RFP. In addition, 180 along with its partners, demonstrated broader experience with projects similar to that envisioned for Palo Alto. There are, however, issues with 180’s financial condition; their assumptions in developing preliminary financial forecasts for a broadband project; and two pending lawsuits. These will require additional discussion and resolution. Staff is requesting Council direction on how to proceed with the proposals. Several options are provided for Council consideration. These range from conducting further discussions with one of the respondents to terminating the process for executing a broadband system. Should Council direct staff to continue the process, it will need to provide parameters, chiefly financial, within which staff can begin discussions with a respondent. For example, each respondent requires that the City contribute to the costs of developing a business plan. Significant additional staff time will be required to interact with a respondent, so staff seeks Council input on how this project is to be prioritized among other City priorities. If Council directs staff to work with a respondent, a series of "next steps" is provided in this report. These will involve an interactive, iterative process with the Council and the provider. CMR:156:07 Page 1 of 8 RECOMMENDATION Staff requests Council direction on options concerning responses to the City’s "Citywide Ultra- High Speed Broadband System" Request for Proposal. BACKGROUND At its January 17, 2006 meeting, the Council directed staff to issue a Request for Proposal (RFP) for the construction and operation of an ultra-high-speed bandwidth system. After several subsequent Council meetings were held, in which evaluation criteria and the selection process were reviewed, an RFP was issued on September 27, 2006. In addition to posting the RFP on the City of Palo Alto Purchasing web site, 127 notification letters were sent out to different potential responders advising them of the Broadband Request for Proposal. On October 19, 2006, 24 people attended the pre-bid conference. From the attendee list, it appears that 16 different companies were represented. On January 9, 2007, the City received two proposals. This report analyzes the proposals received and compares the responses to both the criteria (Attachment 1) and scope of services (Attachment 2) included in the RFP. In addition to the proposals, information gathered from telephone interviews and written questions and answers with respondents is incorporated into the analysis. Staff was acutely aware of Council’s desire to have members of the public participate in some manner in the evaluation process. Since only two proposals were received, staff believed that a simplified review process was warranted; hence, it compared the two proposals outside of a public participation process and it now seeks the Council’s direction. Furthermore, on January 29, 2007, Council directed two of its Members to review the proposals and then present their recommendations to the Council. Staff has placed this report and the two proposals received into an earlier Council packet so adequate time was afforded to the public and the Council to review the material prior to the March 5 meeting. DISCUSSION Staff was interested to know why businesses attending the pre-solicitation conference did not respond to the RFP. Accordingly, in follow-up conversations with these businesses, the following concerns were raised: project risk was not shared equally between respondent and City (mentioned several times); competition would be strong from Comcast and other emerging providers such as AT&T; market penetration rate was uncertain; capital and construction costs would be significant; and financing and ownership issues were too challenging. To varying degrees, these issues permeate the proposals received and will continue to arise if Council directs staffto begin discussions or negotiations with one of the responders. Dynamic City (DC) and 180 Connect Network Services, Inc. (180) each submitted a proposal. Each respondent stated that it could meet the primary objectives of the Broadband project: Capability of providing to each customer 100 megabits per second symmetrical service Provision of data, video, and telephony services Eventual City ownership of the physical system CMR: 156:07 Page 2 of 8 In addition, each respondent indicated that an open system could be provided and that some type of public agency-private business entity relationship could be developed. The two proposals differ in how they addressed the RFP’s request for "ways of mitigating the financial risk to the City" and for experience with "engagements of similar scope and complexity." Dynamic City Proposal Dynamic City proposes to act initially as a consultant to the City and subsequently to serve as a "coordinator" for construction of the network; a "negotiator" with service providers; and a "manager" of network operations. As a first step, DC proposes "a three-month Project Design and Financial Package" which would include developing a business plan, assisting the City in securing financing, and designing a phased roll-out plan. This work is estimated to cost the City $150,000. DC succinctly states, "before the network can be designed or construction can begin, Palo Alto needs to secure funding for this project." DC recommended that the City take the steps necessary "toward immediate network" ownership. This translates into the City funding and bearing 100 percent of project costs and risks. DC provides an option to mitigate the City’s risk. It would assist in identifying a private equity firm willing to invest some $5 to 10 million of the $41 million projected for total capital requirements (excluding financing costs). For this investment, DC states, the equity firm likely would expect a 20 percent return on its investment. In terms of experience, DC has served as a consultant to the Utah Telecommunications Open Infrastructure Agency (UTOPIA) where a fiber network is being phased in for 14 cities. The project is 18 months into completion and is expected to be finished in 2008-09. DC has signed a 25-year Master Services Agreement with UTOPIA for project management, asset management, procurement, and other consulting services. The UTOPIA project comprises DC’s sole experience in project initiation and implementation. In addition, DC is currently performing cost/revenue analysis for potential fiber projects in Portland, Seattle and Las Cruces, New Mexico. Technically, DC has offered a somewhat theoretical solution for a broadband network. It identifies conceptual communication layers not unlike a hybrid of the International Standard Organization’s Open System Interconnect (ISO/OSI) and TCP/IP network models. While this model demonstrates a thorough understanding of a robust fiber communication network, it avoids discussing specific equipment or technology to be implemented in Palo Alto. DC lists twenty-six different vendors as "potential suppliers for the network." This list of a broad range of providers could point to a lack of experience installing, configuring and supporting a network solution; an attempt to provide a "whatever you want" solution; or a conscientious attempt to meet potential, varied City needs. This approach leaves the impression that DC does not have the same field testing experience that a dedicated, proven solution provider could offer. Staff’s perspective is that DC’s proposal is not consonant with key provisions in the RFP. Its funding recommendation, in which the City would bear 100 percent of project costs, does not address the RFP request for "mitigating the financial risk to the City." The City is looking for a type of partnership where the private party contributes substantial capital to the project while CMR:156:07 Page 3 of 8 identifying and leveraging existing City assets. DC’s secondary recommendation in which a private equity firm would invest 5 to 10 percent of project costs would not substantially reduce City risk. Moreover, the City’s RFP called for "eventual ownership" of the broadband system and not "immediate ownership." By "eventual ownership," the RFP meant that the private partner would take the lead in owning and building a broadband system, and at some appropriate, agreed upon future time, the City would assume ownership. Although there is no reason to doubt the long-term potential success of the UTOPIA project that DC has shepherded, or to doubt the high quality of their work, there is a concern about a substantial "track record" of accomplishments in this area. In staff’s opinion, DC has not yet demonstrated the breadth and depth of experience that would be needed to implement the Palo Alto broadband project. 180 Connect Network Services, Inc. Proposal 180’s proposal includes a consortium of firms that would partner with the City to build a broadband system. The consortium is comprised of: 180 Connect Network Services, Inc., which provides "engineering and construction for large scale communications deployments;" PacketFront, Inc., which has international experience in "developing, engineering, and operating solutions for Broadband Open Access fiber networks;" and Royal Bank of Canada’s Capital Market (RBC), which has expressed interest in helping to finance the project. In addition, the proposal states that 180 would build, operate, and market the broadband system. Staff believes 180’s proposal aligns with key requirements in the RFP, albeit with important issues yet to be resolved. In terms of "mitigating the City’s risk," 180 states, "RBC’s fund raising could support the project without any additional assets or capital contribution from the City; however, the ability to secure and raise full financial support for the Fiber to the Home project would be achievable through the identification of assets to be contributed or used on the project by the City." As to "eventual ownership" of the system by the City, 180 said, "...we believe the City should own the network after a set period of time, typically after a 30 year operational agreement." During one telephone interview, 180 stated that the typical contribution of assets by a municipality toward a project was in the range of 20 to 30 percent of the total dollar capital investment. In a subsequent discussion, however, 180 indicated some jurisdiction’s contributions were between 30 and 51 percent. It is evident that only through further discussions with the 180 consortium will the City’s contribution to the project be clarified. 180 Connect and PacketFront do appear to have experience with implementing fiber projects. 180 has worked on various fiber projects in the California cities of Ontario and Shafter; UTOPIA (Utah); Silicon Valley Power (Santa Clara); and the Franklin County Public Utility District (Washington). PacketFront has worked on Fiber to the Home projects in Vestras, Sweden; Dubai City; the Netherlands; and Canada. These projects include the triple,play services and bandwidth the City is seeking. 180 appears technically competent. It is proposing a specific model and operational solution that has been deployed and been operated successfully. 180 identified the equipment to be used from end-to-end, customer premises, network infrastructure, and administrative application. CMR:156:07 Page 4 of 8 However, the following issues with 180’s proposal require attention. Since 2003, 180 had annual net operating income losses ranging from $4.7 million to $13.3 million. In response to a question on these losses, 180’s CFO stated its company: has grown very quickly from $48 million in revenues in 2002 to $225 million in revenues in 2006 has acquired companies which drove up its goodwill and liabilities has been cash-positive, but the non-cash expenditures have dropped its net income into the red Although it is not uncommon for growing companies to experience net operating income losses, the ongoing financial health of 180 is a concern. Also meriting careful scrutiny are the assumptions 180 used in its preliminary financial projections. In years 3 and 4 of operations, 180 assumes "take rates" (i.e., homes receiving one or more broadband services) of 48 and 56 percent, respectively. These rates appear to be especially high when they are compared to Comcast’s current take rate of around 50 percent and are considered in light of the anticipated entry of other providers (such as AT&T) in the Palo Alto market. In addition, these take rates exceed those mentioned in the DC proposal, which are 44 and 49 percent in years 3 and 4, respectively. The prior business plan sponsored by the City (written by Uptown Associates) indicated take rates of 35 and 37 percent in years 3 and 4, respectively. Admittedly, the Uptown numbers were based, upon a market survey that each responder says must be updated. However, both proposals - 180’s more so than DC’s - include take rate assumptions that are robust and could be considered overly optimistic. 180 Connect has two class action lawsuits pending: one that deals with a lunch break issue (which is near resolution) and one that alleges racial discrimination. The information on these cases, however, does not permit the City to deem the proposal as non-responsive. The Council may consider this matter as part of its evaluation of any staff report or recommendation concerning the Broadband RFP. Telephone conversations with 180 Connect indicate that when upper management found out about the discrimination issue, they hired a retired National Labor Relations Board member to investigate the issue and the general work environment. According to 180, the investigator found no evidence of a hostile workplace. He discovered that all ethnic groups were represented equally across all pay scales. 180 soon will be filing its response to the lawsuit and hopes to have the case dismissed. 180 Connect did sign the "Certificate of Non-Discrimination" that is enclosed with all Requests for Proposals. Business Plan Both DC and 180 each claim that a full business plan must be developed before proceeding with a project. DC included the cost of developing a plan in its suggested $150,000 engagement fee. 180 recommends doing a high-level feasibility study at its cost, which would further analyze take rates, define the project, and determine its viability. Like DC, 180 would then develop a project business plan. When asked if they would bear the cost of the plan, the response was that the firm and City would share the costs; the allocation is unclear. If the City proceeds, it will have to identify funding for the plan as well as additional resources for departments participating in the CMR: 156:07 Page 5 of 8 process. For example, the Administrative Services Department cannot continue to absorb staff costs within its budget given other significant priorities and requests to reduce staff to meet the $3 million infrastructure goal. For a high level, side-by-side comparison of the two proposals according to RFP criteria, please see Attachment 3. Proposer References Conversations with respondent references indicate high levels of satisfaction with work performed by both firms. One reference for which DC performed a cost/revenue analysis stated, "We were very pleased with DynamicCity’s report.., and ...have been extremely pleased with their forthrightness and c0operation--they are a very good outfit, and we are following the Utopia project with keen interest." 180 project references speak in a similar vein. One agency, describing the fiber optic backbone and collocation facility installed by 180, said "several people have looked at these and said, ’these are top-notch.’ "Another reference stated, "if you can keep 180 focused on what you want to do, they’re great." The City "has changed the game plan several times, and that’s hurt a bit. But it’s not 180’s fault...Technically, they’re at the top of their game." Based on these reference checks, there are no exceptions to call to Council’s attention. Council Options Council has a number of options concerning the responses to the Broadband RFP: Direct staff to pursue discussions with one of the responders and provide direction to staff as indicated below. Terminate process to provide broadband services. a. b. Co Reasons may include: Stated and implied City financial contribution or risk is high Small number of responses to RFP indicate issues with partnership model proposed in RFP Competition from the incumbent provider and new providers such as AT&T Lack of demonstrated, long-term, financially independent broadband initiatives by public agency or public agency-private entity partnership broadband efforts o Reissue an RFP indicating a higher level of City financial/asset commitment that may attract more responders Should Council direct staff to move forward with one of the responders, staff envisions an iterative, interactive process among staff, Council, and the potential partner firm. To be clear, discussions with a firm may not culminate in an executed contract unless and until the parties can agree on mutually acceptable financial, operational, and service terms and conditions. Yet to move on with this process, staff must begin such discussions, and therefore requests Council direction on parameters within which to conduct the conversation. For CMR: 156:07 Page 6 of 8 example, Council has indicated that it wants to identify existing assets that can be leveraged in a broadband proj ect, such as: Existing dark fiber backbone Spare conduits Useable facility space or locations Other resources that could potentially be made available are discounted permit fees and staff time to guide the project through review and permit processes. As mentioned, DC and 180 expect the City to pay all or part of the costs for a business plan. How much is the City willing to pay for such a project and where will the funds come from? The consensus reached from prior staff analysis and Council discussion is that the General Fund will bear the costs associated with this project. As the City grapples with identifying $3 million in resources for existing infrastructure improvements, what priority and funding level does Council wish to assign to the broadband business plan and project? Although a clearer picture of the City’s financial responsibilities must be obtained, potential City contributions have been cited in the proposals. These include: cash, physical assets, letters of credit, credit enhancements such as assets or pledges of revenue (e.g., sales tax) to back bonds, and long-term contracts guaranteeing a revenue stream. Each respondent indicated that one or more of the above may be required to secure financing. While the City seeks to mitigate its financial risk, staff needs direction from the Council on what the City is willing to risk. Pledging sales tax revenues to creditors in case of a default, for example, theoretically could lead to a downgrade in the City’s credit rating and a reduction in services. In conclusion, staff requests resource guidance for exploring a broadband relationship. Next Steps Assuming the Council directs staff to move forward, the following, initial steps would be taken: 1.Staff will return to Council with a recommendation on required staffing for the Utilities, Planning, and Administrative Services Departments, and the City Attorney’s Office. 2.Staff will return to the Council with a list of available City assets that could be leveraged for a broadband project. 3. Preliminary, high-level discussions with the respondent would be held on: Exploring in more depth the feasibility of the project based on financial and performance assumptions Defining further the respective contributions to the project Determining the costs of a business plan and how the costs will be allocated between the parties 4.Staff would return to Council with information gathered in steps 1, 2 and 3 and request further direction. CMR: 156:07 Page 7 of 8 RESOURCE IMPACT Significant staff time has been devoted to this project since the Council gave direction to issue the RFP. Six senior staff and two analysts (from the Administrative Services and Utilities departments as well as the City Attorney’s Office) have participated in the evaluation. This has cost, at a minimum, $75,000 in salaries and benefits to arrive at this point. It is expected that a similar if not higher amount of staff time and expense will be required to work through additional discussions with a respondent. As stated, the City will be expected to pay for all or part of a broadband business plan. DC included costs for such a plan in its $150,000 fee and 180 stated the City would share in such costs. Moreover, additional non-salary resource impacts can be expected if the City moves forward with a broadband project. POLICY IMPLICATIONS This report and the attached RFP are consistent with Council’s policy and program direction provided at its September 18, 2006 meeting. ENVIRONMENTAL REVIEW The actions requested in this report do not constitute a project for the purposes of the California Environmental Quality Act. ATTACHMENTS Attachment 1: Attachment 2: Attachment 3: Attachment 4: Attachment 5: Evaluation Criteria for Ultra-High Speed Broadband System Project Background and Scope of Work Summary Comparison of Broadband Proposals Dynamic City RFP 180 Connect RFP PREPARED BY: JO.’~EPH ~gACCIO D~p~ty Director, Administrative Services DEPARTMENT HEAD APPROVAL: ~ ~. ~ CARL YEATS / _ L @MEMIL(A~~{SoN~Direct°r, Admi~strative Services CITY MANAGER APPROVA : _ v - Assistant City Manager CMR:156:07 Page 8 of 8 ATTACHMENT1 EVALUATION CRITERIA FOR ULTRA-HIGH SPEED BROADBAND SYSTEM General Criteria: ¯Quality and completeness of proposal; ¯Bidder’s experience, including the experience of staff to be assigned to the project, the engagements of similar scope and complexity; Bidder’s compliance with applicable laws, regulations, policies (including City Council policies), guidelines and orders governing prior or existing contracts performed by the contractor; ¯References from customers of bidder; ¯Whether City would eventually own the system infrastructure. Technical Criteria: ¯Design quality and system features of proposed network; ¯Ability to operate system easily; ¯Ability to rapidly upgrade the system and supply new services easily; ¯Use of standards for construction of the network and delivery of broadband services; ¯Network capabilities and types of service offerings; ¯Network architecture; ¯Network performance/reliability/quality of service guarantees; ¯Network scalability; o Network management. ultra-high-speed Financial Criteria: ¯Bidder’s business structure; °Bidder’s and any subcontractors’ financial capabilities and resources; ¯Estimated ongoing cost of system network maintenance and of end-user equipment; ¯Estimated cost of the project to the City; °Gross forecasted revenues (10 years); ,,Net revenue potential to the City (10 years); ¯Palo Alto customer price for service, cost to connect, and benefits. Implementation/Operational Criteria: -Project implementation schedule and timeline; ¯Bidder’s apparent ability to perform the work within the timeline; ¯Environmental impact of proposed plan; o Bidder’s prior record of performance with City and/or other customers; ¯Quality of service to Palo Alto customers likely to result from bidder’s plan; ¯Bidder’s plan for providing maintenance, repairs, parts and/or services, as well as future expansion or upgrades; Availability of a local office. ATTACHMENT 2 PROJECT BACKGROUND AND SCOPE OF WORK I. PROJECT OVERVIEW The City of Palo Alto ("City") is seeking a proposal for the development, construction and operation of a citywide ultra-high speed bandwidth system. Such a network must provide minimum symmetrical bandwidth of 100 megabits per second per end-user connection, and make affordable and available to the customer in Palo Alto: high speed data transport and Internet access; and voice, data, and video services. II, CITY OVERVIEW Palo Alto is a thriving community of nearly 60,000 people situated adjacent to Stanford University in the heart of Silicon Valley, approximately 25 miles south of San Francisco and 14 miles north of San Jose. Palo Alto enjoys international name recognition. Travelers from all over the world come for purposes of education or research at Stanford University, training or business with the high technology firms of the Stanford Research Park, or medical care at the Stanford Medical Center. The City General Fund budget is approximately $121 million for fiscal year 2005-2006, with eight departments. Palo Alto also owns its own Utilities, including Electric, Gas, Refuse, Storm Drainage, Wastewater Collection, Wastewater Treatment, and Water. Within the Electric Utility is a Telecommunications Division which operates the dark fiber ring (see below). Palo Alto is a residential community of above-average household incomes and above-average educational levels. Approximately three-quarters of Palo Alto residents who are over the age of 25 have four or more years of college, half of whom have received at least one graduate degree. Also, an estimated 95% of households have an internet connection. Other key demographic statistics on Palo Alto include:l []Approximately 28,000 households []57% of population (in 2000) owned a home []Median value of owner-occupied units (2000) was $811,800 []Median household income (1999) was $90,377 []Land area in square miles = 25.98 III.PROJECT BACKGROUND In 1997, CPAU constructed a fiber backbone and is currently licensing dark fiber to interested parties such as telecommunications carriers, ISPs, and local businesses. The Backbone consists of 33 route miles (over 4,750 fiber-miles), with 144 or more strands of single mode fiber along most routes. The Backbone is approximately 52% aerial and 48% underground. The Backbone 1 Sources included: www.infoplease,com; City of Palo Alto Certified Annual Financial Report of June 30, 2005 passes Palo Alto’s major business parks and terminates in several buildings within the City, and can be accessed at over 40 locations. (See http://www.cpau.com/fiberservices/for more details.) In 2000, the Council approved a Fiber-to-the-Home trial for one year, to determine the feasibility of providing citywide fiber.to-the-home in Palo Alto, by offering the service to 66 homes in the Community Center neighborhood for one year..Service to trial participants began in 2001, and was quite successful in terms of customer satisfaction. Given the trial’s success, the Council approved the engagement of a consultant beginning May, 2002 to complete a business case study and determine whether a full-scale FTTH business would be viable for the CitY. As part of that business case, trial participants and Palo Alto residents were surveyed to determine potential market interest in the project. In September, 2002, the business case was completed, and Council agreed both to extend the timeframe for trial participants and to fund the development of a business plan. In the business plan, the consultant assumed the Electric Fund would issue (tax-exempt) revenue bonds to fund the fiber build-out, and demonstrated that a FTTH utility could be economically viable over the 20-year bond financing period. However, in 2004, it was determined that in fact, the Electric Utility could not fund the FTTH project with revenue bonds; therefore financing costs would be greater than previously assumed. In April and May, 2004, staff presented financing options to the Utilities Advisory Commission (UAC) and to the Council that reflected the additional legal information. The only legally and politically feasible options seemed to be finding a private investor or forming an Assessment District. The Council asked staff to monitor other California jurisdictions pursuing FTTH. In 2005, staff recommended, based on the uneven and sometimes turbulent progress of other California municipal efforts, ceasing work on the FTTH program, and discontinuing the trial. Council approved the discontinuation of the trial, but requested that staff report back on the "legal and financial issues" to lay the groundwork for issuing an RFP for a private-sector partner to construct and operate a FTTH service. Then, in January, 2006, Council further directed staff to proceed with issuance of an RFP for the construction and operation of a high-speed broadband system. IV. OBJECTIVES OF THE PROJECT The primary goals for this system are: 1.Capability of providing to each customer a minimum bandwidth of 100 megabits per second symmetrical service; 2. Provision of at least data, video, and telephony services; and 3. Eventual City ownership of the physical system. A secondary goal for the system is to promote competition between multiple service providers. In addition, the following features are preferred: o An open system o Network neutrality ¯Minimal financial risk to the City. V. SCOPE OF WORK A. Requirements of the System System requirements include: Provision of citywide access to service to residences and businesses in Palo Alto. Bidders may be wholesalers or integrated suppliers of those services. Voice, Video and Data "triple-play". This standard broadband service offering as outlined below is the minimum acceptable service level. The transmission medium is left to the Bidder’s discretion, but must be able to provide 100 Mbps symmetrical data rate for each end-user’s hardware connection, with the following services available: o Voice: telephony (legacy analog or VolP) o Video: commercial full spectrum "Cable" (analog) TV including HDTV and Video on demand. o Data: 100 Mbps symmetrical rate ¯Highly Available, with reliability comparable to other competitive systems. Bidders will be asked to comment on the uptime characteristics of their proposed system. ¯Phased Roll-Out: The network owner and service providers in their response should provide their strategy and plans to achieve full deployment. For low-density areas of the City, such as areas west of Highway 280, the 100 Mbps requirement may be relaxed, if access to basic service is provided to all users. Quality of System Service (QoS): Bidders need to provide QoS and packet prioritization for various classes of service such as First Responders, and various applications such as Voice over Internet Protocol (VoIP). Bidders must describe the quality of service capabilities of the proposed network. Systems Management: The network owner’s Network Operations Center, (NOC) is responsible for the monitoring and management of the network. NOC staff should have the tools and capability to centrally manage the network, be immediately notified in the event of network problems, and be able to dynamically reroute traffic or dynamically resolve capacity problems. The network owner must provide the capability to produce performance reports based on traffic classes and area served. Aesthetically Pleasing: All equipment and cabling for the network mounted within public view should blend into the existing architecture and not negatively affect the appearance of existing structures. Adherence to City Ordinances: All equipment must adhere to the Palo Alto Municipal Code and other City requirements and be approved by the City and its appropriate Boards and Commissions prior to deployment. Standards-Based: The System will need to be capable of delivering broadband services to devices built on industry standards-based technologies. The successful bidder will be required to apply for a cable franchise in accordance with P.A.M.C. Chapter 2.10, if the bidder proposes one or more technologies by which the bidder would be deemed to provide cable service in accordance with federal, state and/or local law TO THE EXTENT SUCH REQUIREMENT IS CONSISTENT WITH APPLICABLE LAW. There is pending before Governor Schwartzenegger for his signature AB 2987, which would permit a video provider (one providing cable television as well as open video system services) to obtain a state franchise from the California Public Utilities Commission, not the JPA, in order to provide video programming services. If the video provider obtains a state franchise to provide these services, then it is unnecessary for the provider to also obtain a franchise from the JPA. B. Project Manager / Management The bidder must provide a Master Project Manager (PM) as the central point of contact for both the network owner installation and service provider(s) teams. The PM is responsible for the identification and management of resources and dependencies including people, physical assets, financial or otherwise. The PM is responsible for the management and allocation of resources for the construction, implementation and operation of the network. The successful Bidder must cooperate with the City on the use of Utility poles and under- grounding, and the PM will be the chief contact for this coordination. C. Project Work Plan and Schedule The PM must develop and present for City approval a complete Project Work Plan, including a full description of major tasks and subtasks, along with a proposed timeline for completing each one. The PM will be responsible for continuously maintaining the schedule for the complete roll-out of the project, and for providing status updates on a regular basis. The project schedule for design, implementation, and go-live activities shall be aligned and coordinated such that they are time- and cost-efficient. The PM is responsible for providing a detailed plan and schedule for each logical phase. The plan for each phase must be kept up to date, along with the roll-ups into the Master Plan. D. Milestones The PM is responsible for clearly identifying major milestones and their planned completion dates for the project. On-track, on-schedule, and on-budget information and status of overall project and next-step milestones will be included in regularly scheduled update meetings. E. Customer Service Bidder must, at minimum, adhere to the Quality of Service requirements of the Joint Powers Authority cable franchise and all applicable FCC rules. (See http://www.cityofpaloalto.org/cable/franchise-a~reement.html for complete text of the agreement.) In addition, proof of customer service performance that exceeds industry standards is required, with the goal of meeting the high service standards of the existing City Utilities. Furthermore, bidders must describe how they plan to handle customer support calls, and detail any procedures that will be implemented due to an escalation of complaints. Lastly, bidders shall describe how they plan to handle customer trouble calls and dispatch emergency repair crews. F. Customer Acquisition The bidder must have proven ability to acquire and retain customers in a highly competitive environment that includes competition with no less than one incumbent provider. G. Proposed technologies to achieve the City’s primary goals The bidder may propose any technology that has a proven field success rate that fulfills the requirements of this RFP. H. Technology Description Bidders must describe their technical approach, including as a minimum the following information: Technologies: Any technology that is based on industry standards and meets the Citv’s 100 Mbps symmetrical service goal may qualify. Bidders should be able to demonstrate the capacity of the proposed technology. Network Design: A description of the design criteria, network elements, physical media, switching and routing architecture, interfaces, topology, protocols, system reliability, fault tolerance, availability, and operations and maintenance. In addition, describe the degradation of service expected under the worst case scenario. Network Equipment: A description of the type of networking equipment proposed, and reasons for its selection. Interconnection and Interoperability: A description of interconnection, interoperability, and conformance to published standards. A description of where, when, and how interconnection will occur. A description of how interoperability between networks will be achieved is also required. Schematic: A schematic view of how the networking equipment will be interconnected and integrated to create a citywide network. Upgrade Plan: A plan for upgrading infrastructure as service requirements grow. Network Security: Any network security measures that will be deployed to ensure privacy of customer communications and prevent intrusions on customer computers must be described in full. Data Transport Performance Characteristics: Bidders are requested to characterize the anticipated performance of the proposed network design for data transport. At a minimum, the following attributes shall be described: Throughput: Describe the anticipated peak, mean, and minimum throughput for data transport between any two end stations on the network (specified in Megabits per second); Latency: Describe the anticipated mean, minimum, and maximum latency for data transport between any two nodes on the network (specified in microseconds). VI. CITY OF PALO ALTO OFFERING The City’s dark fiber ring may be considered a potential resource to the bidder. For example, the City will consider licensing to the successful bidder spare capacity along the fiber backbone, and, for a fee, CPAU may extend the fiber optic backbone more deeply into Palo Alto neighborhoods to interconnect with a successful bidder’s nodes, hubs, or other centralized distribution points. The City of Palo Alto owns the utility poles in Palo Alto, along with AT&T and/or Pacific Gas and Electric Company. All construction of new plant or relocation of existing plant in Palo Alto shall meet California General Order (GO) 95 and GO128 rules and regulations, among others. The City also owns conduits, and the City has the rights-of-way needed to provide distribution of utility services within Palo Altol Bidders are encouraged to propose other services the City could offer to help successfully deploy the requested services. VII. ADDITIONAL REQUIRED ELEMENTS OF THE PROPOSAL In addition to the required attachments listed above and in Section 5 of the main body of this RFP which need to be submitted, the bidder must include information on the following: A. Financial Risk to the City: The City wishes to minimize its financial exposure in the development, construction and operation of the proposed system. However, the City recognizes the potential need to contribute financial or other assets to the project to achieve the primary goals. The financial risks assumed by the bidder should also be detailed regarding quantity and timing. Bidder must include specifically: Proposed financial and other contributions required from the City; Assessment of financial risk to the City; and Ways of mitigating the financial risk to the City. B. Ownership: The City desires to own the system’s fiber infrastructure, and at a minimum, it must maintain use and control over the dark fiber network. The City understands that the limitations of such ownership could be partly determined by the extent of the City’s financial contributions to the project. The bidder should clarify the amount of investment required from the City in order to achieve substantial City ownership of the system infrastructure. C. City Roles and Responsibilities: The bidder must specify the proposed roles of the City versus roles of the bidder vis-fi-vis the construction, implementation, and operation of the high-speed-broadband network. D. Description of Service Offerings: Bidders are requested to provide a detailed description of the services to be offered to residents and businesses at project inception, and others that will be phased in within the first 3 years of the project. E. Services by Outside Parties: Bidders are .requested to identify any services, if applicable, that will be provided by outside parties. Any available documents related to agreements with outside parties shall be attached. F. Financial Model and Business Case: Bidders are expected to provide a Financial Model and Business Case in their response. These shall include: 1.Pro-Forma Income (Profit & Loss) Statement (years 1-10) 2.Annual cash flow projections, and a Statement of Cash Position (years 1-10) 3.Expected annual net income to the City based on the bidder’s proposed contractual arrangement, and appropriate cash flow and breakeven analyses 4.Source of funding for Ultra-High-Speed Broadband system construction and operation 5. Preliminary market and competitive analyses to support the pro-forma income and cash flow statements 6. Forecasted customers by year and by service classification (years 1, 5, 10) G. Warranty Terms: Describe all warranty terms and conditions, including price and performance guarantees. ATTACHMENT 3 SUMMARY COMPARISON OF BROADBAND PROPOSALS CRITERION DYNAMIC CITIES 180 CONNECT/PACKETFRNT General: Project Manager/Consultant One comparable project (UTOPIA) Proposed Role of Vendor in Project Bidder’s experience with engagements of similar scope and complexity Whether City would eventually own the system infrastructure. Technical: Network capabilities types of service offerings and Financial: Bidder’s and any subcontractors’financial capabilities and resources Estimated cost of the project to the City; City would own system immediately. Open-Access Model: service offerings would depend upon service providers private investors at expected rate of remainder from bonds issued by City. No capital resources presented; states connections to members of the investment community. $51 million of which $5-10 million may come from a 20% return; taxable Designer, Builder, Marketer, and Financial Partner Many comparable projects worldwide City would own system in 30 years. Open-Access Model: service offerings would depend upon service providers Company is well-capitalized and proposes a specific investment partner, the Royal Bank of Canada. "The City would not have to provide or contribute assets beyond the existing system or facility locations...We believe that the current assets if made available would provide appropriate leverage to complete the funding process." Details to be further clarified.