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Regional Broadband Strategy

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					      Regional Broadband Strategy
                 PROOF OF CONCEPT: FINAL REPORT
Prepared for SWER; Submitted by McNair Business Development Inc.
                                                    | 15.09.2010




                                                  p1
contents
• Proof of Concept Findings     03
• Introductions                 04
• Importance of Broadband       06
• Regional Readiness            13
• The Path Ahead                15
• Appendix 1
       Broadband definitions    22
• Appendix 2
       How the Internet Works   26




                                     p2
Proof of Concept Findings
The findings for the readiness report and the technical and financial assessment
are summarized in this proof of concept: final report. Consultations with
provincial stakeholders, service providers and political leaders are proceeding.
The Proof of Concept has identified the benefits of a regional high-speed network for residents,
businesses and public institutions. Given the support for action within the region and initial backing
from key provincial stakeholders, it is recommended that the Southwest Enterprise Region (SWER)
Board of Directors seek the necessary funding to develop a business plan for a regionally owned
and operated broadband network.
The business plan should include business development initiative with the goal of finding an
industry partner(s) that would invest in the region to take advantage of the high-speed capabilities
and business advantages offered by a regional broadband network. The business plan must also
identify sources of equity and debt financing for the broadband network. Network ownership
options include a co-operative, public utility and a public-private partnership. As well, the business
plan must contain a detailed network design, financial plan, governance plan along with an
operational and management plan.
Assuming a positive outcome, the goal of the business plan would be to position SWER and its
partners to move to the implementation stage.




                                                                                                 p3
Introduction
The Southwest Enterprise Region (SWER) has undertaken a process to
critically examine provincial broadband service delivery and investigate
ways to improve bandwidth in the region. The project steering committee
has identified the following specific objectives that could be achieved with
increased bandwidth:

    -   Enhance the competitiveness of SWER businesses and industry;
    -   Ease the rural/urban divide in terms of access to broadband;
    -   Improve the ability of regional health care and educational service
        providers to deliver innovative programming and services through
        technology links with global systems; and,
    -   Advance the economic and social development of the region.

Best practices research clearly demonstrates that broadband improvements offer a means of
reversing social and economic trends that have been hollowing out rural
                                                                          Broadband
communities. Broadband also is an essential infrastructure for
                                                                          Communications
prompting robust rural development and for the attraction and retention
                                                                          System: A network
of youth and skilled workers. It can lead to improved access to
                                                                          such as a cable
government and public services with enhanced program outcomes and
                                                                          system capable of
with reduced delivery costs. Forging healthy and prosperous rural
                                                                          delivering multiple
communities by eliminating or narrowing the so-called digital divide
                                                                          high capacity services
between rural and urban communities should be a priority for everyone,
                                                                          simultaneously
as it benefits the economy holistically.
                                                                             Bandwidth: A
Put simply, DSL (Internet over telephone lines) and cable networks
                                                                             measure of the data
cannot offer the bandwidth required by citizens wishing to adequately
                                                                             transmission rate; the
participate and compete in the expanding digital economy, nor can they
                                                                             maximum amount of
offer a competitive response to needs of businesses, governments and
                                                                             information (bits per
other organizations. As the convergence of technologies (voice, video
                                                                             second) that can be
and data) continues and investment in next generation networks takes
                                                                             transmitted along a
place, the role of very fast optical “Fiber to the Premise” (FTTP) has
                                                                             channel
become increasingly important because fiber provides the optimal
solution faster networks and new services require.
Network design should anticipate at least a 20-year horizon. Recent history back to 1995 has
demonstrated a 100-fold increase, or a doubling every 18 months, of broadband capacity. It is
reasonable to assume 1 gigabyte per second (Gbps) bandwidth speeds will be standard within a
decade. Focusing on the present, Internet traffic growth trends demonstrates that aiming to deliver
100 megabyte per second (Mbps) capacities to both business and residential premises is both
realistic and necessary. There is no question that the current local infrastructure in much of North
America is currently inadequate to the task.
Fiber, however, cannot provide the total solution. As the need to reach into surrounding rural and
remote areas becomes pressing, complementary wireless technologies, such as Wi-MAX


                                                                                              p4
(Worldwide Interoperability for Microwave Access) and LTE (3GPP Long Term Evolution) will
typically be employed to fill gaps in coverage and offer additional services within a municipality to
facilitate mobility. Thus, to narrow the rural-urban divide, the solution must be multi-faceted.
Like the highway system, fiber cable is a public infrastructure with little economic or service sense
to have competing delivery systems. Currently, infrastructure improvements are largely driven and
decided upon by the network owner and based on financial profitability rather than the needs of the
broadband users. Under a common carrier model, the infrastructure would be separated from the
providers of services, who would then compete among themselves to sell their products to the
broadband users over the common network available to all for a usage fee or through revenues
provided by advertisers.




                                                                                                 p5
Importance of Broadband
Broadband has become part of the basket of public          Digital Divide
goods and services that municipalities need for
residents and businesses to optimize experiences,          The limited access residents
pursue opportunities and offer an improved quality of      of some rural communities
life for all. Municipalities are starting to look at       have to information and
                                                           new technologies that
broadband as a competitive advantage in the global
                                                           impact negatively on the
marketplace. SWER understands that knowledge is            social well-being and
the new economic fuel that is driving the world            working life of people not
economy. Knowledge involves gathering information          participating fully in the
and using innovation, expertise and experience to          new knowledge economy
improve productivity and quality or to create new
goods and services (see Exhibit I). In many aspects, rural communities
have the most to gain from eliminating the so-called “digital divide” that
hinders full participation in the knowledge economy at this point.

Exhibit I: Drivers of the Knowledge Economy
    Industrial Economy                                                  Knowledge Economy


    Raw Materials, Tangibles                Basic Inputs                Knowledge, Talent, Experience


    Machine-Centric                         Production                  People-Centric


    Oceans, Railways, Highways, Air         Distribution Network        Information Highway, Internet


    Ships, Trains, Cars, Planes, Trucks     Transportation Vehicle      Phones, PDAs, Computers, PDAs,
                                                                        Etc.


    Water, Electric, Oil, Diesel            Fuel                        Vision, Ideas, Skills




The knowledge economy demands investment in “big pipe 1” broadband for many reasons,
including:
       -   Innovation and Knowledge Transfer: Levels the playing field for individuals, social
           organizations and businesses through access to new technologies, ideas and markets.
           Higher speed supports distance education and video conferencing by allowing clearer

1The  Big Pipe Reference- Relative to data transmission, a related term, bandwidth or "capacity," means how
wide the pipe is and how quickly the bits can be sent down the channels in the pipe. (The analogy of taking a
single lane road to a multi-lane highway is a common comparison). One reason traffic flows faster is because
fiber has managed to convert a one-lane or narrowband highway into a many-lane or broadband highway.
Source: IT Encyclopaedia, 2010




                                                                                                         p6
        images without “stuttering”. It supports telecommuting as an important employment option
        and environmental strategy.

    -   Reliability and Productivity Gains: Increased symmetric capacity means Internet
        transactions and interactions will transmit in a timely manner. Files such as media-rich
        documents, full-length movies, video streaming, encrypted files, and video telephony all
        require capacities of greater than 5 Mbps to function effectively.

    -   News, Culture and Entertainment: Moving forward television and film will be distributed
        by broadband offering local TV (sporting events, local news, community events) and
        network broadcast feeds in a viewer selected multi-channel universe with feature length
        high definition movies.

    -   New Technologies: Voice Over Internet Protocol is the low-cost “new kid on the block.”
        As higher Internet speeds become available, latency issues disappear as speed and
        system capacity increase bringing dramatic cost reductions in communications budgets.
        Dual mode Wi-Fi mobile phones expand voice and data connectivity.

    -   E-Government: online service delivery technologies are well established and proven to
        afford cost savings for citizens, government. In addition, service outcomes are enhanced,
        and services are easier to access (for example, new technologies such as online metre
        reading and peak-load management through precise real-time monitoring and peak-load
        pricing differentials).


Existing service providers provide a “sameness” of service over the entire provincial network upon
which they market and deliver their services. They are more concerned with their overall system
parameters and performance rather than regional or municipal economic and social development
needs. Incumbents provide asymmetric services, unless users are willing to pay very large monthly
fees. Currently broadband users are mostly restricted to the incumbent’s services for phone,
television and Internet. The business model of existing service providers means that new
technology and higher speeds will hit the most densely populated markets first. Rural areas and
smaller municipalities will continue to play a game of catch-up.

Other jurisdictions have shown that the installation of “big pipe” connectivity is a necessary and
effective, but not in itself a sufficient strategy for attracting certain types of industry and businesses
to a community. A number of small US and Canadian municipalities have used broadband as a
tool for attracting online distribution companies and other businesses. If SWER is to undertake a
broadband project, an important component is the development of investment attraction plans
aimed at bringing new development to the regions. Exhibit II illustrates some of the types of
development that could be pursued.




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Exhibit II: Some Example for an Investment Attraction Strategy


                                                                 Remote
  E-tailing       Server or                                                     Online
                                  Onling           E-           Monitoring                     Research
   and E-           Data                                                         Agri-
                                  Gaming        Commerce           and                         Clusters
 distribution      Farms                                                       Marketing
                                                                 Security



                                                                  Video,         Greater
   Lands         Information
                                                  Online         data or         logistics
                   storage                                                                    Collaborati
    End,                          Growth         auctions        sensor        manageme
                  demand is                                                                   on through
  Costco,                          Area         with video      monitoring        nt and
                   doubling                                                                   technology
 E-Bay, Etc.                                    connection       (oil and       inventory
                  every few
                                                                   gas)           control
                    years

    -    E-tailing and E-Distribution: Online shopping has become a fact of life. New applications
         enrich the shopping experience by allowing customers customize their purchases (e.g., try-
         on clothing before purchase). These businesses require hosting sites with large
         broadband connectivity.


    -    Server or Data Farms: Secure off-site storage of government and corporate data is a
         tremendous growth opportunity. Many Canadian and multinational companies are actively
         seeking reliable “off-shore” jurisdictions with “big pipe” connectivity in which to establish
         their storage sites; Province of Saskatchewan is exploring options for secure remote
         storage on all government data.

    -    Online Gaming: Latest developments in home gaming and online gambling require large
         Internet capacity. Provincial jurisdictions are planning entry into online gambling.
         Saskatchewan Indian Gaming Association (SIGA) is actively exploring fiber connectivity to
         its casinos.

    -    E-Commerce: Large volume online transactions require large bandwidth and data storage
         information for both private and public sector organizations. In addition, high-speed video
         connections are needed to support services like telehealth and online auctions.

    -    Remote Monitoring and Security: Ultra high-speed broadband allows monitoring of
         multiple sites over a wide geographic area central site with video, data, or sensor
         monitoring (i.e., warehouse security monitoring, oil and gas remote sensing).

    -    Online Agri-Marketing: Online technologies allow for greater logistics management,
         greater inventory controls and greater quality management of business transactions like
         online livestock sales.

    -    Research Clusters: Collaboration between researchers at Swift Current experimental
         farm and other research organizations supports the development of new research
         initiatives. In addition, educational institutions will be able to extend their reach with higher
         quality video conferencing and sharing of research data.



                                                                                                    p8
Exhibit III illustrates the speed required to conduct various activities through the Internet:

Exhibit III: Increased Speed Expands Functionality and Productivity
   Speed Range                                        Service Options
500 Kbps – 1 Mbps        Voice over Internet protocol (VoIP), short message service (SMS), basic
                         email, web browsing simple sites, streaming music using caching, low
                         quality and highly compressed video

1 Mbps – 5 Mbps          Web browsing complex sites, email with larger file attachments, remote
                         surveillance, Internet protocol TV-standard definition (IPTV-SD), small
                         and medium size file sharing, ordinary telecommuting, one channel of
                         digital broadcast video, and streaming music

5 Mbps – 10 Mbps         Advanced telecommuting, large size file sharing, multiple channels of
                         IPTV-SD, switched digital video, video on demand SD, broadcast SD
                         video, two to three channels of video streaming, high definition (HD)
                         video downloading, low definition tele-presence, gaming, basic medical
                         file sharing and remote diagnosis, remote education, and building control
                         and management

10 Mbps – 100 Mbps       Telemedicine, educational services, broadcast video SD and some HD,
                         IPTV-HD, complex gaming, telecommuting with high quality video, high
                         quality tele-presence, HD surveillance, smart building control

100 Mbps – 1 Gbps        HD telemedicine, multiple educational services, full HD broadcast video,
                         full IPTV channels, video on demand HD, immersion gaming, and
                         telecommuting with remote server services

1 Gbps – 10 Gbps         Research applications, uncompressed HD video streaming tele-
                         presence, live event digital cinema streaming, telemedicine with remote
                         control of medical instruments, interactive remote visualization and virtual
                         reality, sharing terabyte size datasets, and remote supercomputing




Municipal Broadband Networks
Municipal owned and operated broadband networks are becoming a common approach to
enhancing broadband services for citizens and businesses. Examples from both Canada and
United States are provided below.

Kingston, Ontario
Utilities Kingston provides power and water services and is an innovative provider of broadband
networking services to organizations and businesses in Kingston and area. The broadband
networking operations initially were founded on a fiber optic network created to link information
technology users in Kingston and to interconnect with users around the world. The network spans
over 1,000 kilometers of fiber optic cable and additional coverage provided through a
complementary wireless system with services in Napanee and Brockville, and a dedicated fiber link
to Telecom Ottawa. Utilities Kingston is community owned and its Community Broadband Network
(CBN) was designed to benefits all constituents. The vision for the Kingston region is to become a
"smart community" that involves the use of information and communication technologies in new
and innovative ways to empower its residents, institutions and region as a whole. The city, is
building five towers, is partnering with OmniGlobe to install wireless equipment to serve rural


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areas. This is in addition to 11 towers Utilities Kingston has already built to serve the Limestone
District School Board and other public sector organizations in the area. Utilities Kingston has a
mandate to get broadband into the schools -- municipally it runs broadband a networking service
for 60 sites and each school connected by fiber gets 100 Mbps while those connected by wireless
networks get 10 Mbps.

Olds, Alberta
Olds, located approximately 90 km north of Calgary, six years ago a FTTP project was started as a
community development initiative. Olds has been experiencing an exodus of people leaving for
Calgary. Starting with a community consultation process, it became apparent that local residents
and businesses were aware of the government putting in
                                                                Unbundled
the Alberta Supernet. Even though initially the
government believed that the private sector would take          Fiber access allows various internet
up the last mile connectivity, this did not happen and          service providers to pay to lease the
hence the people of Olds were interested in extending           last mile of fiber, to which they
the Supernet to their homes and businesses. The Olds            connect their own access network
Institute for Community and Regional Development -- a           equipment, allowing for increased
volunteer based organization -- is currently still in charge    competition.
leading the project. The FTTP network has a potential of
4000 connections. Olds is looking for connection speeds of 60-80 Mbps symmetrical for its FTTP
network. Services such as HDTV, VoIP, and movie-on-demand are targeted to become available
over the network. It is unclear as of yet how many residents are really interested to sign up. It is
indicated however that a 20% uptake rate would represent an insufficient demand to justify
investment. Going ahead with planning, Olds received funding from the government (including the
Rural Alberta Development Fund). In the summer of 2009, a company contracted by Olds is
designing the network, and was estimated to be finalized by July 2009, after which the building can
start. With an estimated building period of 8 months, it is planned that by fall 2010 the network will
be operational. Nevertheless, the actual building of the network will only start if a service provider
has been contracted.

Coquitlam, British Columbia
In Coquitlam, a suburb of Vancouver with about 120,000 residents, a dark fiber network has been
built where fiber is leased to service providers. Currently, four service providers have been
contracted. For this FTTP project, currently only high-rise buildings, businesses and malls are
being connected. This follows other European projects, such as in Amsterdam and Rotterdam,
where the easiest buildings are connected first. However, in the longer term it is expected that all
homes will be connected, and thus true FTTP is expected to be provided to all of Coquitlam. Qnet,
the non-profit dark fiber provider, is a utility company. The city of Coquitlam is the only shareholder
of Qnet and initiated the project to stimulate competition in telecommunications, as well as to
stimulate economic development. Through the rollout of fiber, it is believed that the city becomes
more attractive for businesses to locate within and will also enable people to work from home
rather than having to drive to work (in e.g. Vancouver). The investment model is based on a 25
year return period. Profits are foreseen in about 10 years, which then will be used to pay back the
loan used for the initial investments. The network has been operational since December 2008.
Services provided over the network range from regular Internet services provision to television like
services (such as on demand). In order to enable unbundling and thus competition, the network is



                                                                                                p 10
based on a Point-to-Point architecture 2. As one of the key factors to make FTTP business models
viable is the take rate, which must be significantly high in order to recoup investments. To this
extent, Qnet works together with its service providers to market services to end users in order to
get a cash flow going. This is also the reason why at first the high density areas are targeted.
Moreover, new housing development projects are thus not desirable for FTTP projects as it takes a
while before all homes in new neighborhoods become occupied and thus a significant subscriber
base arises. Currently there is a network of about 50 km of fiber. Bell, an incumbent tele-
communications company, is among the operators leasing the dark fiber of Qnet. Operators
currently pay about CAD $400 per month to lease one fiber strand (and thus connect to a building).
Nevertheless, the main costs are in still in backhaul3 provision. The backhaul for Qnet providers is
currently 100 Mbps, which is shared and thus with multiple users at the same time speeds will
fluctuate.

Fredericton, New Brunswick
Fredericton is the capital city of New Brunswick, with a population of about 85,000. Access to
good-quality information and communications technology infrastructure is essential to the citizens
and businesses of Fredericton, and the municipal government has played a major role in
developing this infrastructure for Fredericton. In 1999, to promote and support economic
development through innovation, and in response to concerns about the high costs of Internet
access for local businesses, the city established E-Novations, a city-owned company that created
and manages the Fredericton Community Network. Much effort was needed to gain the support of
municipal politicians and to overcome the resistance of the largest telecommunications carrier in
the province, but E-Novations persevered and created a fiber optic network that provides
bandwidth to local businesses on a wholesale basis, as well as serving the needs of local
government. This co-operative model of infrastructure development reduced the costs of Internet
access significantly and also resulted in increased competition in Internet provision in Fredericton.
The community broadband network manages more than 60 km of fiber. In addition, Fredericton
established itself as the first municipality in Canada to offer Wi-Fi to its residents in downtown and
have significantly reduced the telecommunication costs for business and government agencies in
their city.

Reedsburg, Wisconsin
Reedsburg Utility Corporation broadband service was launched in 2003. The service provides
local schools with 100 Mbps links for less than $500 per month, compared to the $650-$750 per
month they were previously paying for just 1.5 Mbps connections. The initial utility network, which
cost roughly $500,000, included construction of a fiber ring around much of the city. As it built this
fiber ring, the Reedsburg Utility Commission (RUC) began receiving requests from local schools
interested in also using the fiber network. These were followed by similar requests from local
businesses and, eventually, from residents. Like Reedsburg’s schools, businesses wanted access
to fiber’s vast capacity and realized what this access could mean for the future. The total cost of

2 A form of FTTP network architecture, where each home is connected through a separate fiber from the central
location. Point-to-point networks need more fiber and thus are more expensive, but also have the greatest
capacity as users share less fiber.



3
 "Backhaul” refers to the high speed, high bandwidth connection that the Internet service provider itself has to the
Internet.


                                                                                                                 p 11
Reedsburg’s fiber network was $13.8 million, and was financed with a local bond. This initiative
was an important factor in attracting Lands End to establish a distribution centre in Reedsburg for
its online retail business.
During 2007, Reedsburg’s FTTP network generated roughly $2.87 million in revenue. Combined
with annual operating expenses of nearly $1.69 million, this yielded an operating cash flow of $1.18
million (often referred to as EBITDA, or earnings before interest, tax, depreciation and
amortization). A key to this impressive financial success has been the fiber network’s success in
attracting customers. The utility has 2,465 residential customers out of roughly 4,000 homes
passed, as well as 235 business customers. In total they have about 60% of the market. On the
healthcare front, RUC’s network has reduced the cost and improved the accessibility and ease-of-
use in sharing large documents, X-rays and other bandwidth hungry applications for Reedsburg’s
medical community. The citizens, businesses and public institutions of Reedsburg now have the
chance to succeed. Without RUC stepping up, it very well may have been a different story for this
small Midwestern community.


Bristol, Virginia
OpitNet municipal network was launched in 2003 and was the first fiber system to offer triple-play
(Internet, telephone and phone) services. In January 2003 Bristol Virginia Utilities formally notified
its electric customers they could sign up for OptiNet’s telephone, long distance and data services.
In early July of that year, Bristol residents also began signing up for cable television services. They
provide service to about 8,000 premises in a market of 13,000 total subscribers. The other
subscribers are served by the cable companies. OptiNet began consistently generating positive
net income during the third quarter of 2007—three years after it went EBITDA-positive and a little
more than four years after it began offering a full lineup of services. OptiNet contributes its
success to:
     - The provision of locally-provided customer service and technical support, something that
       is becoming increasingly rare among regional and national telecommunication operators,
       a lack has frustrated many customers and would-be customers.
     - The delivery of quality products and services at affordable and stable prices over a state-
       of-the-art, fiber-optic network.
     - The average residential OptiNet customer saves $20 a month ($240/yr.) compared to
       what they would pay for comparable service from an incumbent.

Burlington, Vermont
The lack of broadband availability and high quality service from incumbents led Burlington citizens
to vote in favor of a municipal fiber network operated by its local municipal utility, Burlington Electric
Department (BED). BED partnered with a private company, Aptus Networks, to build the network.
The service was launched in 2000 and generated a positive net income in 2009. The Burlington
fiber network was funded through a tax exempt capital lease rather than a municipal bond. The
network’s capital lease operates very much like a mortgage, with the private financier owning the
network and leasing it back to the city for the term of the lease, which for the Burlington FTTP
network was 15 years. After the term of the lease, the city will own the network.




                                                                                                  p 12
Regional Readiness
Regional stakeholders engaged in this process understand a gap exists
between major urban and more rural broadband; this gap is vocalized as a
difference between towns and farms within the region rather than a
comparison to major urban centres such as Regina and/or Saskatoon.
There is general agreement that the technology gap will continue to
increase within the province if there is not a dedicated effort to bring urban
style broadband to rural communities.

Current Services & Challenges
Saskatchewan’s main service provider, SaskTel, is providing asymmetric services in large towns
and villages that are comparable to those subscribed to by most businesses and residents in
Regina and Saskatoon (i.e. 5 Mbps download and 640 Kbps upload). Smaller communities and
residents living on farms generally receive lower levels of service or no service. SaskTel will be
launching its 3G+ cellular network, which will improve Internet access in remote areas (within the
realm of wireless access for those who have compatible devices). Speed will be 5 Mbps, but cost
will be a factor and service will be limited to those who own specific types of cellular devices.
All regional hospitals, schools and provincial government offices are served by CommunityNet, a
program originated by various entities within the provincial government to provide rural areas with
increased access to broadband connectivity. Over the next two years, minimum symmetric speeds
are being increased across the board from 640 Kbps speeds to 3 Mbps in rural areas. These
institutions in the major cities will receive at least 1 Gbps. Excluding the unaffordable option of
paying for dedicated, symmetrical, high-speed services (100 Mbps) at costs between $11,500 and
$8,000 per month, the current service levels are not conducive to the future demands of the
knowledge economy. Current service providers will only invest if they can sell more services.

Community and Business Participation
Twenty interviews survey and an online survey of 30 other individuals involved in a variety of
businesses and organizations provided the following interesting responses:
    -   100% of those interviewed and survey respondents agreed that broadband services were
        critical to the success of their business or organization.
    -   96% agreed knowledge workers can conduct business from anywhere with high-speed
        broadband connectivity.
    -   68% of respondents said broadband improved the productivity of their organization or
        business
    -   55% felt broadband reduced costs and improved customer service.
    -   Almost 60% used the Internet for marketing and 41% conducted commercial transactions
        over the Internet.
    -   More than 60% said the Internet was an important tool for learning
    -   68% said they used it for communicating with customers.

Understandably, the consultations revealed that many broadband users have adapted to their
current level of Internet service. Those with service challenges have often found alternative



                                                                                                 p 13
methods to satisfy their needs or are resigned to live with the connectivity they have. The following
themes were identified:

Digital Divide
While those interviewed understand a gap exists between major urban and more rural broadband,
this gap is vocalized as a difference between towns and farms within the region rather than a
comparison to major urban centres such as Regina and/or Saskatoon. The understanding of gaps
between speeds within these various areas centres upon first access - as it is perceived that major
urban centres have access to new technologies, funding and implementation of infrastructure
faster than the SWER. Stakeholder knowledge is based mostly on marketing of so-called
broadband services offered by current service providers. There is general agreement, however,
that the technology gap will continue to increase within the province if there is not a dedicated effort
to bring urban style broadband to rural communities. If the urban access to broadband technology
continues to progress more rapidly than in rural areas, so will the digital gap.

Health and Education
The Cypress Health Region and Chinook School Division are being served by current providers
through a Community Net program, which was established to provide greater access to social
programming functions within the province. Within this framework, representatives from Health
and Education are relatively satisfied with the present access and usage of broadband. While
opportunities for expansion and improvement exist, the agencies look at process improvement, role
clarification and problem resolution to deal with the present glitches in technology (and do not
blame the technology itself for the perceived issues). Tools related to the use of broadband
technology in the heath and education sectors are evolving and these must be implemented at a
pace acceptable to the customer base. For example, Heath is not looking to use telehealth for
primary care diagnosis presently and treatment and Education is not looking to eliminate in-class
room opportunities for online resources (whenever possible). Agencies are looking to the
provincial government to provide the lead in new services and service delivery models.

Business and Industry
Those business users who understand the future importance of higher broadband speed report the
current cost of the infrastructure and services from service providers is preventing them from
obtaining the desired improvements in Internet speed and capacity they need. There is a
consensus that broadband is important for the future growth and prosperity of their enterprises and
the region.

Agriculture
The agricultural residents experience the most significant gap in broadband access and
technology. There is stronger support around the need for farm and rural development of
broadband technology than there is for further expansion within the urban centres that is seen as
further increasing the digital divide. In fact, it was noted on multiple occasions that any regional
initiative that does not address rural access (and farm access) would only be of detriment to the
region over the long-term and would not serve to solve the present or future issues related to
technology access.

Personal Use
In general, residents living in towns or urban centres with broadband access feel the status quo is
relatively acceptable from a personal usage standpoint. They do not have a full understanding or


                                                                                                p 14
appreciation of the potential benefits of faster broadband speeds, nor are they aware the gap
between upload and download speeds. Personal users primarily deal with periodic online activities
such as email, social networking, web browsing, and interactive media that focuses on
downloading activities more often than uploading activities or on video streaming.


Path Ahead
SWER comprehends and acknowledges the complexity of undertaking a
regional broadband network, but also understands the positive impact
improvements in connectivity can have on the region socially and
economically. SWER has three possible courses of action in regards to a
local broadband strategy.
    1. Incremental Approach: Lobby and rely on incumbent service providers (SaskTel, Shaw,
       etc.) to provide enhanced infrastructure and services.
    2. Regional Business Model: Develop a regionally-owned and operated broadband utility
       that will update the broadband infrastructure and services while idealistically utilizing
       existing infrastructure
    3. Private Sector Alternative: Seek a private sector business that will make the necessary
       broadband improvements, including expanded fiber and network infrastructure. This
       approach is regarded as highly unlikely given the size of the customer base (low revenue
       potential) and the widely dispersed population (higher costs).

To achieve the types of improvement SWER needs and wants, serious consideration needs to be
given to the regional or municipal broadband model. In both the US and Canada, municipalities or
community-driven projects have been used -- with varying degrees of success -- to improve local
services for businesses and citizens.

Regional/Municipal Model Option
An organization under local ownership and governance is better able to determine community
needs and requirements to fit local service and development objectives. Local control ensures
security of service and the comfort that the service provider will respond to the service needs of the
community. Innovative devices and services can be deployed without incumbent involvement or
approval, such as the provision of symmetric down and upload speeds.
With ownership and/or participation by urban and rural municipalities (and perhaps community
organizations), SWER could act as a regional catalyst for economic development. The advantages
of a structure with wide representation are numerous:
    -   Rights-of-way for infrastructure already in existence and are under municipal authority
    -   Billing, service and maintenance infrastructures already in place for utility type services
        such as water and electric systems (e.g., Swift Current Light and Power)
    -   Opportunity to pool existing organizational infrastructure (e.g., municipal offices,
        maintenance, etc.) across the SWER
    -   Regional Utility Network can by used as a model for other regions throughout the province




                                                                                               p 15
Network Configuration
The following example of possible network configurations is provided only for illustrative purposes
and is modeled on what has been adopted on other jurisdictions. A detailed technical design and
business plan needs to completed by SWER in the next stage, should the Board decide to move
ahead, to determine the best solution for SWER.



Exhibit IV: Example of Possible Network Configuration

                                                                       Internet Backbone
             Swift Current                                                 Connection
          • Regional Distribution Hub
            • FTTH throughout city
                • Wi-Fi hotspots




                                                   Regional fiber
                                                     Network
                                                                                              Wi-Max
                                                                                             Transmitter




             Major Towns
        • Premises Connected by Fibre
                •Wi-Fi Hotspot

                                                                                  Rural/Farm
                                                                           • Up to 70 Mbps radio connection
                                                                               • Up to 50 KM Coverage


The main features of this configuration are:
    -      It employs a combination of high-speed radio transmitters and Fiber to the Home (FTTP) to
           achieve a minimum connectivity level of 20 Mbps for each customer. Individual connection
           speeds can be raised to 100 Mbps as demanded.
    -      Populated centers will have FTTP and rural/farm customers served by radio links up to 70
           Mbps.
    -      FTTP within populated areas like Swift Current will be predominantly new-build.
    -      Connections from a Swift Current hub to other towns and villages could predominantly use
           existing fiber.
    -      The main system trunk feed has high capacity fiber bundles currently passing through
           Swift Current (MTS Allstream, SaskTel and CP Rail). Utility would likely contract for 3
           Gbps capacity.


A significant amount of fiber already exists within the region. As noted earlier, CommunityNet
provides a fiber connection between schools, health care facilities and government offices in


                                                                                               p 16
Saskatchewan and has contracted with SaskTel over the years to lay a large amount of fiber
throughout the Province.
Collaborating with an existing service provider to administer this municipal utility the most efficient
and effective option by:
       -    Building on existing network infrastructure
       -    Levering partner’s technical expertise and infrastructure
       -    Jointly exploring marketing and growth opportunities
       -    Leveraging partner’s financial capacity

Partnership candidates would include SaskTel, the current service provider, which has expressed
some interest in exploring a business relationship with SWER. Other potential partners need to be
explored.

Financial Considerations
This section provides a high-level overview of the costs associated with ubiquitous FTTP
connectivity. The required capital to deploy fiber to the premise is massive, and such an
investment takes a long time to recoup. Concrete financial details cannot be determined at this
time, as the largest barriers are not technical capabilities and construction techniques, but the
legacy 'business model' or 'public policy model' applied to providing connectivity 4. As decisions are
made and a delivery model is selected in subsequent stages of the project, further financial
analysis will be conducted.
The upfront investment required for a project of this nature is significant. A large investment in
fiber and complementary wireless technology infrastructure may be required. This cost can range
from $15 million to $30 million. In addition, depending on the network configuration and the number
of the premises utilizing FTTP connectivity the cost per subscriber can range from $500 to $1,000
per subscriber– depending on the penetration level or take up rate.
The take up indicates the number of premises with access to the FTTP network that acquires a
connection. This can have a major impact on the effective cost per premises connected. The
majority of fiber cable infrastructure will incur a cost whether or not premises passed by the
network actually connect. US data reported indicates total costs and variability reported by a large
network operator. For example, Verizon's average cost per-customer is around $3000-4000
assuming a 40 percent take-up rate. At 20 percent, the cost is closer to $7000. Verizon is
focusing mainly on dense metropolitan and suburban areas, with a mixture of aerial and buried
fiber, and in close proximity to businesses. Less dense suburban and rural areas would be
significantly more expensive 5. It is important to note that this example is not a direct indication of
the costs that SWER would incur if they choose to go forward with the project. Factors such as
inherited infrastructure, partnerships and the like can significantly impact the financial picture. It can
be estimated that the required revenue per subscriber to range from $105 to $135. This would
require subscribers to be purchasing a variety of services or triple play services to ensure revenues
can be maintained.


4
    Budde, Paul: Big-think strategies - Costing and open network issues in relation to FTTP deployments
5
    Slater & Wu: “Homes with Tails”


                                                                                                          p 17
Capital and operating costs could range from $1 million to $2 million annually, and will vary greatly
depending on the:
    -     Ability to use existing fiber infrastructure or totally new infrastructure
    -     Network design
    -     Number of subscribers
    -     Average revenue per subscriber
    -     Service provider arrangements – in-house or third party
    -     Backbone connection agreements
    -     Marketing campaign

The type of business model selected, as well as, regulatory and governance approaches will play a
significant role in the attractiveness of the financial situation. Studies have shown that government
involvement in FTTP infrastructure should be based on the social and economic benefits that are
derived from it and not the profitability.
The financials for a business plan will have to address the following capital and operating cost
centres (see Exhibit V).

Exhibit V: Standard Broadband Project Costs
        Capital Costs: Infrastructure                Operating Costs               General and Administration

   Fibre to Wireless Access Point –       Subscriber Unit Costs (Customer       Billing System
   Fibre and Installation (trenching)     Premise Equipment- LTE Receiver)



   Tower & Installation                   Marketing Costs                       Bandwidth Control (e.g. VOIP)

   Access Point Radios                    Operations and Administration         Customer Churn (1-5% monthly)

   Power Hookup                           Of f ice Facilities                   Management

   Cabling the Equipment Together         Technical & Maintenance               Prof essional Services

   Engineering Costs                      User Authentication Server

   Site Preparation and Surveys           E-Mail Server

   Licensing Fees                         IP Address and DNS Server

   Testing and Conf iguring System        Customer Support

   Network Planning                       Finance




Governance
The governance and business model must ensure consistent management; cohesive policies,
processes and quality, cost-effective operations and these will be influenced by a variety of factors.


                                                                                                         p 18
The most vital factors are the broadband network configuration, and who will own the fiber/wireless
network and who will operate the backhaul network.
Until these decisions have been made, it is difficult to determine the ideal governance model;
however, the advantages and drawbacks of options can be discussed. Assuming the absence of
a private sector firm willing to provide the broadband infrastructure required by the Southwest
region, other options would have to be explored.
    1. Private Public Partnership: Traditional private sector providers who already have
       broadband capabilities and infrastructure -- such as SaskTel, Shaw, TELUS and Bell -- are
       profit driven. Private sector providers only make infrastructure investments where there is
       a reasonable return on investment within a reasonable period to support stockholder value.
       Under a public private partnership, a private party could take full or partial responsibility for
       the initial capital investment, designing, building and operating the broadband network.
       This option reduces the capital investment and risk for the region, but in turn limits the
       decision-making power of the region. If some parts of the operations were not able to
       achieve full cost recovery, such as services to the farm, a private investor would not see
       this as an attractive venture. Options for a public-private partnership models are:

            - Model 1: Utility designs, builds, and owns operates the backhaul network
            - Model 2: Utility designs, builds, and owns but engages an independent partner to
              operate the backhaul network
            - Model 3: An independent partner designs, builds and owns the infrastructure, but
              the municipal utility operates and collects the revenue income and subsidizes the
              monthly operating costs
            - Model 4: Alternative arrangements between the municipality and independent
              service providers

    2. Public Utility: The operations and governance of the regional broadband utility is
       dependent on the municipal utility’s ability to own and operate all elements of the
       infrastructure. The public utility option has more complex implementation challenges than
       the private partnership model, but may allow for more innovative funding opportunities and
       ensures the municipality maintains a greater level of control.

        Based on other jurisdictions in Canada and the United States, the governance model for a
        broadband utility that is owned by a municipality or community not-for- profit is usually
        structured as per Exhibit VI. For a subscriber base of approximately 4,000, the utility
        would need about eight to ten employees, including management, which would be
        overseen by a Board of Directors and executive management.




                                                                                                p 19
Exhibit VI: Standard Governance Structure

             Board of Directors

              Manager
                             Marketing & Sales
                              Brand
                            Management      Operations
             Professional                    2 Technical &   2 Customer   2 Finance and
               Services      Subscriber      Maintenance       Support    Administration
             (Contracted)      Sales




Business Planning
The development of a business plan would have to examine the following key issues.
   -   Broadband Financing: Broadband networks are characterized by high capital costs.
       Typically, financial institutions, like banks, will not finance these types of projects because
       it is difficult to seize or liquidate the infrastructure assets.
   -   Average Cost Per Premise: The cost to pass a premise and connect a premise vary
       depending on the density of the area. To pass a premise combined fiber and radio
       broadband network (Wi-MAX wireless) lowers the basic infrastructure cost per premise
       substantially.
   -   Number of Subscribers (Take up rate): The financial success of a broadband network
       depends on the take-up rate and this depends on service quality, cost and marketing.
   -   Average Revenue per Subscriber: Because of the high capital costs, these networks
       needed high revenue per subscriber to handle the financing costs. In case studies, they
       offered triple-play services (phone, television and Internet) for a monthly competitive fee.
   -   Backhaul Rates and Services: Backhaul service agreements that connect local networks
       to the Internet require a reasonable scale of activity to reach a reasonable price for
       backhaul services. Backhaul rates are normally related to the data volume. Many ISPs
       find backhaul expenses prohibitive, limiting their ability to roll out broadband services in
       some areas. Backhaul costs and services are one of the main challenges in the viable
       deployment of broadband in rural areas.
   -   Broadband Design: To ensure the benefits are harvested from a community-controlled
       network, the system design and services must be targeted to expected outcomes and a
       plan needs to be put into place to ensure the benefits are maximized. Where there are
       competing broadband services, the public infrastructure must provide users with equal or
       better functionality (e.g., improved services and speed, decreased price) in order for it to


                                                                                               p 20
        be adopted. This means developing local capacity and capabilities to promote, build and
        oversee the network.
    -   Third-Party Service Providers: To attract multiple service providers over common
        infrastructure requires a large volume of users or broadband activity to support competitive
        services. Lower density, higher cost networks may only be able to support one service
        provider offering triple-play services for the service provider to be profitable. Rural
        networks generally do not have the volume to support multiple service providers.
    -   Incumbent Challenges: A community broadband start-up has to be prepared for the
        incumbent service providers to fight to keep market share through service improvements
        or price reductions, as well as possible regulatory or legal challenges

Recommended Path Ahead
SWER has been engaging with provincial stakeholders, including SaskTel, government ministries
and political representatives, to ascertain local support for a regionally owned and operated
broadband utility. If theses consultations have a positive outcome, it is recommended that SWER
obtain the funding for a business plan. This business plan would include:
    -   Market assessment
    -   Detailed financial plan
    -   System design
    -   Governance model
    -   Operating plan
    -   Regulatory requirements and licensing
    -   Project financing plan
    -   Implementation plan




                                                                                             p 21
Appendix 1-Broadband Definitions
What is “Broadband”?
Broadband is essential for municipalities to produce, maintain, and/or attract information age top-
earners.
Broadband Internet access, often shortened to just broadband, is a high data rate Internet
access—typically contrasted with dial-up access using a 56k modem.
Health districts require broadband to improve access and provide state-of-the-art services. Small
and Medium-sized Businesses (SMEs) require broadband to market and participate in online
commerce. It is clear that communities that wish to not only survive, but prosper, will find the
method and means to gain this infrastructure; sometimes as beneficiaries of federal or regional
programs, and sometimes through their own devices. Nevertheless, there are different kinds, and
speeds, of connectivity that all qualify as “broadband.”
First Generation broadband is a mere 200 kbps. This definition is still used in some statistics
(typically to inflate a country’s so-called “broadband penetration” figures, a new measure of
economic growth) but it is an antiquated descriptor. Second generation begins around 780 kbps,
which is sufficient to run e-mail and basic web browsing, but little more. It ends around 5 mbps,
which is the level of internet access that Great Britain is universally guaranteeing all its residents by
late next year.
5 Mbps is considered the lower end of broadband. This is the point where the use of streaming
video becomes practical. Most large urban centers in industrialized countries can offer between 7
mbps and 50 mbps, which roughly corresponds with the term Third Generation.
The current “gold standard” is 100 Mbps, the level where HDTV can be watched online and the
level of access that the “Asian tiger” nations, including South Korea and Japan, offer to the vast
majority of their citizens. These same nations are gearing up for 1 Gigabyte broadband within 5
years, as is the state of California.
Bandwidth for Business

New organizational structures rely on lean management systems, which have amounted to the
elimination of many layers of middle managers in large predecessor organizations. They have also
pioneered the use of decentralized operations, where the main firm coordinates a network of
subcontractors. Most widely known is the growing phenomenon of reliance on contract labour or
“e-lancers” and global production systems.
A key feature of new IT-enabled business processes is that companies rely increasingly on a
network of strategic partners, linked by the Internet. These structures are rapidly becoming integral
parts of business models and, in addition, collaboration between these strategically aligned
companies is emerging as an important form of business organization.




                                                                                                 p 22
Bandwidth for Education
Colleges and other institutes are mandated to be closely tied to their communities and to act
quickly to foresee and meet the changing knowledge skill needs of their regions. Guided by
thousands of Industry Advisory committees ensuring that curriculum is pertinent and employment
oriented, colleges and institutes provide key support to economic development goals and
strategies. Leaders need to focus their efforts, however, at all education levels, from elementary
school to universities to continuing education and workforce programs.
Computer and web skills are increasingly part of every young person’s repertoire, but astute city
and regional leaders will understand business needs in the IT global world and train the regional
workforce to fill niche markets. This type of training does not necessarily occur at the post-
secondary level. It is estimated to take 10 years of training to create a computer expert. In other
words, technological literacy efforts must begin at the middle school level. Specialization will begin
to occur at the secondary level.
Bandwidth for Residents
It is apparent that our society is still at the beginning of a tidal wave of technological change. At the
crest of the current trend is a move towards convergence. Before the rapid development of the
Internet, separate systems—telephone, television and video—stored and transmitted voice, video
and data. Today, these systems are converging onto the Internet. Convergence is taking place at
the content level (IP protocols); at the business level (companies offering combined services); and
at the device level (new equipment providing access to combinations of e-mail, phone, web, and
television). Households will choose to focus on those options that improve quality of life, and
reduce expenditures.
In rural areas, video communications can be incorporated to provide a vital lifeline between
communities, to market local services, and to offset smaller pools of labour. The availability of
video has obvious applications for conducting personal calls over long distances, for security
applications, and for preparation of online content (i.e., podcasting). Managing video-conferencing
traffic across all the connections in a session requires that everyone is able to ensure their
networks are able to send television quality traffic to all the other participants. Video streaming over
broadband requires generous amounts of bandwidth.




                                                                                                  p 23
Glossary

Aspect Ratio: the ratio of a television screen’s width to its height
(Bps) Bits per second: Transmission rate for digital information expressed as the number of bits
(zeroes or ones) sent or received per second
Broadband Communications System: A network such as a cable system capable of delivering
multiple high capacity services simultaneously
(BW) Bandwidth: A measure of the capacity of a channel of communications in the broadcast
spectrum. A range of frequencies or the amount of spectrum used to transmit pictures, sound, and
data
Bundling: Combining goods and/or services into a single package, often for a discounted price
(CLEC) Competitive Local Exchange Carrier: A company that has been allowed to offer local
telephone service
Common Carrier: A communications provider, such as a telephone company, which offers its
services to all members of the public for a set fee (tariff)
Digital: An intelligence-carrying signal consisting of a stream of bits of zeros and ones for sound,
video, computer data or other information
(DOCSIS) Data over Cable Service Interface Specification: The leading standard for cable
modems
Downstream: Flow of signals from a cable system’s head end through its distribution network to a
customer
(DTH) Direct-to-Home: All satellite service providers, including C-band (3.7-4.2 gigahertz) and
Kurtz-under band (11-18 gigahertz)
Ethernet: The Institute of Electrical and Electronic Engineers’ (IEEE) widely used access method
for the local area network (LAN) protocol
Fiber Optics: Thin transparent fibers of glass or plastic that are enclosed by material of a lower
index of refraction and in which Light-Emitting Devices (LEDs) send light through the fiber to a
detector that turns the light into an electrical signal
Forbearance: A regulator body’s decision not to exercise its authority over a given market or
company, usually because there is competition
(HDTV) High-Definition Television: A digital television broadcasting system with higher resolution
than traditional television systems (standard-definition TV, or SDTV). HDTV has twice the linear
resolution of SDTV, thus showing more detail than either analog television or regular DVD. A very
high resolution source may require more bandwidth than available in order to be transmitted
without loss of fidelity




                                                                                               p 24
(IP) Internet Protocol: An International Standards Organization (ISO) standard that implements
the network layer 3 of an open system interconnection (OSI) model that contains a network
address and is utilized in directing a message to a different network
(ISP) Internet Service Provider: A service provider that has its own network (or leases) to which
end-users dial into to connect to the Internet
(LAN) Local Area Network: A data communications network that links together computers and
peripherals to serve users within a confined area
(LNP) Local Number Portability: A feature that allows customers to maintain their present
telephone numbers when they change carriers for incoming calls
Node: A connection point in a cable system (often where a fiber enters a neighbourhood and
connects to coaxial cables serving 200-1000 individual homes)
Packet: A group of bits switched as a unit block of data used for transmission in a packet-switched
network
Point of Presence: A site where telecommunications companies physically interconnect their
systems with other networks
Regional Hubs: Fiber optic rings that link several adjacent or regional head ends, thus improving
reliability, lowering costs, and expanding cable’s offerings to include Internet access and telephone
service
Trunk: A communications network that can be used to connect circuits between switches or to
interconnect switches to form a network
Video on Demand: The ability to provide television programming to customers upon request.
(VOIP) Voice over Internet Protocol: A general term for a family of transmission technologies for
delivery of voice communications over IP networks such as the Internet or other packet-switched
networks
Wi-Fi: A brand name for a local area network that uses high frequency radio signals to transmit
and receive data over distances of a few hundred feet; uses Ethernet protocol
(Wi-MAX) Worldwide Interoperability for Microwave Access: provides wireless transmission of
data using a variety of transmission modes, from point-to-multipoint links to portable and fully
mobile internet access




                                                                                              p 25
Appendix 2- How the Internet works6
•      The Internet is generally a global system of interconnected computer networks.
•      It is the biggest network of computers on earth. All the computers connected to the Internet
       are actually connected to each other through the Internet Service Providers (ISPs) which in
       turn are connected to the bigger routers or the backbone of the Internet.
•      This backbone is a computer network of commercial organizations, government organizations,
       military, academics etc. The backbone is a large server where the data is exchanged or
       transferred through. These backbones are connected to each other through fiber optical
       cables.
•      The ISPs are connected to these backbones through fiber optic cables in order to minimize the
       transmission loss.
•      The users are connected to ISPs through cables or wireless routers. There is an authority
       called The Internet Corporation for Assigned Names and Numbers (ICANN) which coordinates
       the assignment of unique identifiers on the Internet, like the IP Addresses and the Domain
       Name so that you can analyze what is being done from where to conserve the security
       throughout.




6
    http://www.mygeekpal.com/23/the-internet-misconceptions-explained/




                                                                                             p 26
This Project was funded by:
Stark and Marsh           Cypress Health Region
Honey Bee Manufacturing   Communities of Tomorrow
Enterprise Saskatchewan   Credit Unions of Southwest SK
City of Swift Current     Town of Shaunavon
Town of Maple Creek       Town of Herbert
RM of Gull Lake           Southwest Enterprise Region




                                               p 27
our role is to continually push the competitive envelope
southwestsask.ca




                                                    p 28

				
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