Proposed Wireless Broadband Project: Connected OC Low-Cost Internet Access Network Business Case

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EXECUTIVE SUMMARY Business Case Drivers

 Socioeconomic profiles of Orange County’s Red Zone populations are statistically shown to accompany low-rates of broadband adoption. In 2005:

 Only 24% of low-income households had broadband.  Over 70% of those with $75,000 median income did

 County can take measures to promote broadband adoption by deploying a limited, wireless network for low-cost Internet service to economically distressed areas. Target the “Red Zones”, which comprise 20 square miles.

 Statistics are based on Census and State of California Broadband Task Force data.

 Households should “qualify” for the low-cost Internet program so the County doesn’t appear to be competing with incumbent Internet providers.

Strategies to Meet the Critical Success Factors for Grant Funding

 Deploy Metro Area broadband to “community anchor institutions”, i.e.,:  Community colleges.

 Public safety entities.

 Connecting anchors are a core focus of grant program.

 Potential public-private partnerships: Government, business (network provider) and community groups have expressed interest in partnering with the County:

 North OC Community Colleges, OC Dept. of Education seeking grants for “Public Computing”.

 City of Santa Ana

 OC would allow them to use low-cost wireless network to extend reach of their programs.

 BTOP prefers joint projects connecting as many anchors as possible.  Source out the network design, build and operations to a private company.  Deploy broadband to economically distressed areas:

 Extend broadband “Last Mile” to underserved areas.

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“Connected OC” Business Case – Low-Cost Internet

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Long Term Costs & Matching Funds Sources

 Low-Income Internet Access Network total build out costs: $3.3 million.  Allocation of Stimulus funds (if awarded):

 ARRA (Stimulus) pays: $2,155,300  County match (30%): $923,700  Source of matching funds:

 One-time net county investment ($923,700) to be recovered by revenue collected from subscriptions, payback anticipated in third year of operation.

 Operating Revenues and Costs:

 Year 2 subscriptions (3,500) could generate annual revenue of $315,000  Year 8 subscriptions (16,800) could generate annual revenue of $1,800,000

 Red Zone total households 78,000. Assuming broadband adoption of <=50%, there are 39,000 potential households that could subscribe.

 Annual subscriber growth rate assumed 3% annually (2000/year).

 Higher growth assumed after launch, tapering off to sustain 3% growth thereafter.  Subscriptions assume $15/month connect fee. Projections assume subscribers lost to

attrition are balanced 1-for-1 with signing of new accounts (net-zero impact).

 Data supporting potential subscriber demand in economically distressed areas (Red Zones):  California Broadband Task Force data:

o 2006 report noted that subscription levels in California are also closely associated with income, education, and ethnicity.

o Only 24 percent of California households with incomes under $25,000 subscribed to broadband

 Public Policy Institute of California (PPIC) data:

o 2007 study showed that only 51% of Californians earning under $40,000 a year subscribed to either dial-up or broadband at home

o Over 95% of those earning $80,000 or more a year subscribed.

o While 91 percent of college graduates in California subscribe to the Internet at home, less than 50 percent of those without any college education do.

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March 25, 2010 James Mata Program Manager

County Executive Office, Information Technology COUNTY OF ORANGE

333 W. Santa Ana Blvd., Room 208-D Santa Ana, CA 92701-4062

RE: Support of “Link OC (Orange County Regional Wireless)”, Grant # 7615 Dear Mr. Mata,

The California Community Colleges Economic & Workforce Development Program -Orange County Digital Media Center and North Orange County Community College District supports the County of Orange in their efforts to secure a Recovery Act grant for their broadband network project.

The County’s project would provide low-cost Internet access to economically distressed areas of Orange County. Many of these are the same communities that will benefit from public computing center projects we have submitted to BTOP for Recovery Act funding, Grant # 6767.

The County has agreed to partner with our organization by providing us with access to their network, thereby extending the reach of our training programs into the homes of these communities.

By combining our efforts we expect to better leverage our Recovery Act funds and further improve the economic prospects of these vulnerable populations.

Sincerely,

Christie A. Campbell

Director, Orange County Digital Media Center

Advancing the Business of Creativity

North Orange County Community College District 1830 W. Romneya Dr.

Anaheim, CA 92801 714-808-4617 714-808-4606 (fax) ccampbell@sce.edu

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Year 0

Qtr 4 Qtr 4 Qtr 4 Qtr 4 Qtr 4 Qtr 4 Qtr 4 Qtr 4 Qtr 4

Cumulative 0 0 3,500 9,500 12,500 13,800 14,800 15,800 16,800

Net Add 0 0 1,500 1,500 500 250 250 250 250

Projected revenue (Red Zone Network): $ ‐ $ ‐ $ 315,000 $ 990,000 $ 1,372,500 $ 1,532,250 $ 1,644,750 $ 1,757,250 $ 1,869,750

Payback Period: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Total

Total Cost 0 50,000 1,349,000 830,400 830,400 830,400 830,400 0 0 4,720,600 Total Benefit 0 35,000 1,938,300 1,172,000 1,372,250 1,532,250 1,644,750 1,757,250 1,869,750 11,321,550 Net Benefits 0 (15,000) 589,300 341,600 541,850 701,850 814,350 1,757,250 1,869,750 6,600,950 Cumulative Net Benefits 0 (15,000) 574,300 915,900 1,457,750 2,159,600 2,973,950 4,731,200 6,600,950 ROI 139.83% Qualifying low‐income households

Year 6 Year 7 Year 8

Year 1 Year 2 Year 3 Year 4 Year 5

Name of Service Offering Customer type Subscribers:

Red Zone Network Explanation of Methodology: Countywide Public Safety Network: Rate of subscriptions was based on rate at which network site installations will complete. Assumes 100% of eligible public safety agencies will opt in due to demand for interoperable high‐speed data networking among jurisdictions. Subscriber base will remain stable after that time, since growth in the number of public safety agencies countywide is low. Red Zone Network: Service area total households equals 78,000. Assuming current broadband adoption is 50% or less, there are 39,000 or more possible households that could participate in the low‐cost Internet program. Quarterly growth rate in number of households subscribing to the program assumed to be slightly less than 1%/quarter (500 households/quarter). Annual growth rate in number of households subscribing to the program assumed to be about 3%/year (2000 households/year). Higher growth rates are assumed shortly after the network launches and public awareness of the program spurs rise in demand. Expect adoption to taper off and sustain 3% growth afterwards. "Projected revenue" indicates expected revenue from subscriptions ($15/month connect fee), prorated to reflect adoption over time, and is used in pro forma financial projections. For simplicity, it is assumed that number of subscribers lost to attrition is balanced on a 1‐for‐1 basis with signing of new accounts (net zero revenue impact).

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Wi-Fi (802.x) mesh wireless access points $3,500 600 $2,100,000

Network Operations Center setup (one time, by professional network co.) $149,000 1 $149,000

Detailed Network Design $50,000 1 $50,000

Deployment of 600 access points (one time) $1,200 600 $720,000

Mounting Assets I – Pole Make Ready Contingency, 600 access points (one time) $100 600 $60,000

Low-Cost Internet Wireless expense subtotal: $3,079,000

Less Stimulus Grant (70%) $2,155,300

County's Required 30% Match $923,700

Funding sources for the match:

In-kind Project management and support staff contributed by CEO/CEO-IT) $490,000