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RFD- 4214 Business Items   Item #   11. a.    
Regular Council Meeting Agenda   
Meeting Date: 03/08/2021  
Title:    Broadband Initiative Update - Walker
Department: Economic & Business Development  
Strategic Vision Element: This topic relates to all three of the City’s strategic vision elements contained in Council’s Strategic Plan Related Goal: Spruce Grove has a business environment that attracts new businesses to the city, encourages and supports new business start-ups, and helps ensure existing businesses are competitive, successful and profitable.

Request for Decision Summary
The City of Spruce Grove is exploring options for operating models and partner opportunities as part of the fibre optic broadband initiative.  IBI Group will be making a presentation on the progress made to date and the next steps in the process. 

Proposed Motion
That the presentation by IBI Group on the City's fibre optic broadband initiative be received as information.  

The City developed a Fibre Optic Broadband Strategy which was presented to Council in June 2019.  As recommended in the strategy, the 2021 - 2023 Corporate Plan includes an initiative to build out a fibre optic broadband network in the industrial and commercial areas and completion of the City fibre ring to connect municipal facilities.  The approved budget in 2021 is $4.651 million including $4.251 million in stimulus funding from the Alberta government.  The stimulus funding must be spent by December 31, 2021 and the City must retain ownership of the asset for at least 5 years.    
The City retained Rohl Global in late 2020 to undertake the detailed design of the broadband network including cost estimates.  This will be completed by mid-March 2021.  The plan is to use the design to prepare and issue a construction tender by early April with a closing date of April 27th.  Upon completion of construction, this would provide a fibre optic spine through our industrial and commercial lands – essentially a “middle mile” network.  What it doesn’t provide are the following: 
  • Connection to the Edmonton internet exchange; 
  • “Last mile” connection to customers (Fibre To The Premise) from the spine; and
  • Provision of services (voice, TV, internet). 
In order to address these gaps, Administration has engaged IBI Group to assist in identifying viable strategies.  IBI has extensive expertise and experience in working with municipalities in the development of implementation business plans for broadband networks.  IBI will be making a presentation to Council on where we are at in terms of operating models and partner strategies and opportunities.  The presentation will be given by: 
  • Bruno Peters, Deputy Regional Director, Canada West, IBI Group 
  • Keith Ponton, Manager, Intelligent Systems, IBI Group 
At the same time, Administration has been holding discussions with other municipalities who have either built out or are actively pursuing fibre optic networks.  These discussions have been expanded to include major telecoms, independent ISPs (Internet Service Providers) and other players in the broadband space to assess their possible interest in partnering or otherwise collaborating with us.  The response has been generally positive and there is interest in what we are doing and a willingness to continue these conversations. 
The position of most municipalities we have engaged is that broadband is really a utility that provides essential services to business and the broader community.  As such, there is a willingness to accept the cost of construction and operation as a continuing expense to the municipality just like roads or transit.  There is interest in how to offset these costs to the extent possible through licensing agreements with ISPs.  However, the long term benefit is business competitiveness in retaining and attracting investment and talent, and providing adequate broadband services to the community at affordable rates.  
A key learning from our consultations with other municipalities who are already further along is the importance of finding potential partners that can address the gaps between having fibre in the ground and an operational network.  This has usually been done by issuing an RFP that sets out the intent and objectives of the municipality and requesting proposals from parties interested in collaboration or partnership opportunities.  In many cases, the municipality has funding in place to build a fibre network and intends to retain ownership; in other cases, the municipal fibre is contributed to a larger network or is ultimately purchased by the private partner.   
For Spruce Grove, Administration believes it is prudent to follow a similar process.  This involves the City taking the additional step of issuing a Negotiated Request For Proposal (RFP) inviting interested parties to submit proposals for collaborating or partnering with us on a fibre optic network.  This would help us determine what the opportunities are to find players who can fill the gaps required for lighting and expanding the network and which proposal(s) are to the best advantage of the City, price and other factors considered.  Specifically we would be seeking partners that can bring some combination of the following attributes: 
  • Create leverage by expanding the coverage of the network beyond what City funding can build; 
  • Ability to operate and maintain the fibre network; 
  • Provides connection to the Edmonton internet exchange; 
  • Brings some measure of network redundancy in case of disruptions; 
  • Serves the role of an ISP in marketing and providing services on the network (could be either open or single access);  
  • Able to fund “last mile” connections to the premise; and 
  • Can provide a financial return to the City on its fibre investment. 
The timing would be to issue the RFP by March 15th and leave open to April 12th.  By the end of April, the City should complete its evaluations know whether there are viable partnership opportunities and how we want to proceed.  On a parallel track, Rohl Global will have completed the network design and the construction tender process will have closed so that we are in a position to complete construction by year-end.  While in the perfect world we would know who we want to partner with prior to construction, it is not essential but we may move from collaborative design to a straight contribution of assets in any partnership arrangements.
The main constraint to the options available is the requirement to expend the Stimulus Funding by December 31, 2021.  Other approaches considered were: 
  • Combine the construction tender with the RFP to select a potential operator: these are two very different processes.  The tender is largely driven by price while the RFP looks for overall benefit to the City in meeting the broader objectives.  
  • Complete the construction tender before initiating the RFP: this would clearly separate the two processes.  However, it would also eliminate any ability for the potential operator selected through the RFP to influence the design, technical requirements and configuration of the network. 
  • Proceed with an initial expression of interest instead of an RFP: this would still allow potential operators to come forward and indicate their interest.  However, we have already done much of this work through consultations with potential players and it would mean a substantial delay into later this year before we would be in a position to get definitive proposals and make a final decision.
Administration has consulted with a large number of other municipalities who have either developed or are in the process of building fibre optic broadband networks.  Extensive consultations have also taken place with the telecoms, internet service providers and wholesale network operators to determine their level of interest in participating in the Spruce Grove initiative.  In addition, there has been engagement in regional discussions on broadband with Edmonton Global, the Edmonton Municipal Regional Board and other proposed regional broadband initiatives.  
Administration has engaged IBI Group to assist in the development of a business plan, RFP design, evaluation of proposals and providing ongoing expert advice on broadband.  IBI has recognized expertise in the design and implementation of broadband networks both in Canada and globally.  
In order to support the investment the City is making in broadband, there is a need to partner or collaborate with companies that will allow us to move from a dark fibre network to an operational system providing services to customers.  The fibre network built by the City has three initial customer streams – the underserved industrial and commercial areas; the City fibre ring which will link City facilities; and a dedicated fibre link owned by NAIT from their campus to Highway 16A.  Depending on whom the City partners with, there may be opportunities to expand the network through leveraging our investment or as part of a future build.   
As was shown in the Fibre Optic Broadband Report in 2019, the level and cost of broadband service in Spruce Grove’s industrial and commercial areas has become a major competitive impediment which affects not only existing businesses but our ability to attract new investment and talent.  The City’s broadband initiative takes a large step toward addressing this deficiency but in order to minimize risk exposure to the City, it stops at providing fibre infrastructure rather than operating the network and becoming an internet service provider (ISP).  The ability to light the network will come through business arrangements with companies in the business.  This limits the City’s financial exposure but it does require us to form these partnerships.  
At the same time, we are completing the City’s fibre ring which links City facilities and assets.  This is a longstanding corporate objective which is needed for better connectivity and enhanced security.  The fibre ring also provides a foundation for the City to pursue “smart city” initiatives ranging from real time traffic and transit management to monitoring the condition of City assets.

Fiscal Impact
Financial Implications:
The total approved budget for the broadband initiative is $4.8 million.  In 2020, $149,000 was set aside to commence design of the network.  The budget in 2021 is $4.651 million including $4.251 million in stimulus funding from the Alberta government.  The balance is funded by MSI grants.    

Maintenance costs are limited to repair of the fibre if damaged by third party excavation work.  This expense will need to be considered but may be offset through insurance or payment by the party responsible for the damage. 
IBI Presentation

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