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CR 88-201 Approval - Cable Commision . . Oct,ober 14, 1988 Council Report # 86-201 ,. _ ". ~",,' '. ...... ~ ~ . -":~ .....: ~ ~.,.~,.; L._1.:.:.....~ ._....~ :",;o=.,",.!'t -~;..t- \~,~.... " _,I -, ", ....,.'." APPROVAL - CABLE COMMISSION RECOMMENDATIONS ltEGARDING SOUTHWEST INSTITUTIONAL NETWORK GROUP (SWING) Recommendation I recommend that the City Council adopt the following motion: Move that the C~ Council adopt the recommendations of the Southwest Suburban Cable Commission rtlA~~d to the viability of the Institutional Ne~ork ~s c2utained~n the CaPle CommIssion ~Net report of September 16. 1988. The effect of this motion will be to defer construction of an I-Net for at lease 5 years, authorize future study of the I-Net to be directed at Cable Commission discretion, and direct the expenditure of $17,660.50 for the purpose of enhancing the residential network from the proceeds of the relief settlement with Rogers Cablesystems. Oye;v~ew The attached report from Southwest Suburban Cable Commission explains the background on this issue. A detailed study of the need for I-Net as part of the cable system has now been completed. The recommendation of the Cable Commission, based on a detailed study, is that the construction of an I-Net be deferred but that an enhancement to the residential network be pursued. I~sues to Consider o Will this adversely impact our City or the system? ~o. It has been determined that the system is not feasible, therefore, not constructing it will not change the current system configuration. o Isn't the company required to construct an Institutional Network? Yes. However, this action will only defer implementation which does not violate the terms of the agreement. o How will the system be affected? The Institutional Network will not be constructed, however, an upgrading of the residential network will enable double the capacity of transmitting signals per channel which will allow both the local governments and school districts to improve cablecasting abilities. Supporting information Southwest Suburban Cable Commission reports. ~ . . ... SOUTHWEST SUBURBAN CABLE COMMISSION co l1:.:rh:"1 &. Time. Ltd. 9<j() :'\:onhland P!aZ;i .~~oo \X'e:-l HOth :-;(("1.'1;:'1 Bloomington. .\1:--: ::'C;'d I ((112) H9.i-tl-ll SEP 20 1988 September 16, 1988 Mr. Craig Rapp City of Hopkins 1010 So. First st. Hopkins, MN 55343 Dear Mr. Rapp: The Southwest Suburban Cable Commission (SWSCC) reviewed the study and report of the Southwest Institutional Network Group ("SWING") at the Commission meeting on september 7t 1988. As provided in the Performance Agreement of 1985, SWING was to study the economic viability of requiring the cable company to build a l66-mile institutional network in the Southwest Suburbs. The group recently completed its study, as you know, which included investigation of both commercial and school district users' needs and possible economic support of the network. The Commission asks that you put the attached summary of the SWING process, along with the Commission's recommendations on page 4 of the attachment, on your next city council meeting agenda for review and approval. The Commission recommends acceptance of its three recommendations by your City. The request for approval includes authorization for the Commission to expend $17,660.50 out of the settlement proceeds, to match the cable company's contribution to enhance the subscriber network. As YOU'll recall, the enhancement of the subscriber network doubles the channel capacity for institutional users, which include all five cities and the school districts. The Commission felt that, at this point, it was critical to get the e~~ancement started, as Rogers Cablesystems is committed to providing it rather than to wait for a co-payment from the school districts. The Commission has taken the position that future loaning of the publi~ and government access channels will be done on a cost basis in order to recoup some of the cost of this project from the school districts. Please understand, however, that the cities are direct beneficiaries of the enhancement as it dOUbles their channel capacity also--this contributed to the Commission's decision to support the project financially. Please contact Ann Mathews of my office when your council has acted on the enclosed report. The cable company is prepared Cities of Eden Pr~iirie. Edina, Hopkins, MinneronKa & Richfield . i.... "..,,', . - Mr. Craig Rapp September 16, 1988 Page 2 to order the equipment once all five cities have passed the three recommendations of the Commission. If you have any questions concerning this material, please call either Ann or myself. yours, Adrian E. Herbst SW2/kd Enclosures cc: Debra S. Cottone ': :':\': ':(\~'I :;..<~~ '~,>ffi :i~ ~:,-,''''' ~ ,- -~,; . ~~~ >1 : -'~~1 '->' ~ - SUMMARY OF THE SOUTHWEST INSTITUTIONAL NETWORK GROUP'S STUDY OF THE VIABILITY OF THE INSTITUTIONAL NETWORR IN THE SOQTHWE~T,~YBB.S-_ During relief negotiations with Rogers cablesystems, Inc., in 1985, the southwest Suburban Cable Commission (SWSCC) agreed to temporarily relieve Rogers of their obligation to provide a 166-mile institutional network throughout the Southwest suburbs providing 472 channels for video, voice and data transmission. The relief of this obligation was hinged on the formation of a study group to evaluate the viability of such a network in the area. The Performance Agreement of 1985 set out guidelines for the establishment of the study group, along with m.embership guidelines and the parameters of their study and report. In the Spring of 1987, the SWscc and Rogers sought representatives from the community to serve on the study group named the Southwest Institutional Network Group ('ISWING"). SWING was made up of four appointees selected by the Commission and four appointees selected by Rogers. The Chairperson was named by the Cable Commission. The membership was made up of representatives from the cable industry, telecommunications industry and the school district. It was staffed by both the Commission and Rogers. SWING began their study in August 1987 by reviewing the original franchise provisions, along with the structure of the institutional network and its applications. A large part of their charge involved assessment of the financial viability of building such a network. Therefore, SWING initially reviewed potential uses by area businesses and followed a process of meeting with and surveying Eden prairie businesses on their voice, data and video transmission needs over the next five or so years. Eden prairie was chosen due to its density of new businesses. Twenty-nine area businesses and institutions were contacted to attend an informational meeting on January 21, 1988, and were sent a survey to complete on their technology needs. Ten people representing nine organizations attended the informational session. Eight organizations returned a completed survey. The survey and presentation to interested businesses did not prove fruitful in demonstrating backing tor such a network. At the SWING meeting in March 198B~ a member of SWING who is also a member of the Educational Cable coordinating Committee (ECCCl, requested that a separate process be used to review institutional uses within the school districts before SWING made its recommendations to the Cable Commission. . . ~ I-net Report September 16, 1988 Page 2 In response to this request, SWING developed a needs assessment survey and distributed it to the ECCC representative from each of the five school districts, Hennepin County Library and Intermediate District 287. The survey requested projected uses of the technology for the years 1988-1995. The three-month process of SWING's staff working with the ECCC to assess their specific needs resulted in a joint presentation put together by Rogers Cablesystems and the ECCC to explain uses of the technology, associated options, and costs of providing such services to the SW school superintendents and SWING. Two of the six involved school superintendents attended the presentation, although all had originally indicated an interest in attending on May 24, 1988. All representatives from the ECCC attended the presentation except the representative fr.om the Hennepin County Library. The joint presentation included a description of the schools' need of the interactive classroom technology, along with an outline by Rogers of two options for meeting those needs. The fi~st option involved expansion of the subscriber network to double the current capacity to all school institutions at a cost of $35,321. The second option, which had greater long-term use but limited the users to eight secondary schools, was a mini I- net at a cost of $643,691. Discussion occurred concerning variations of the options, as well as to compare the cable options with Northwestern Bell's recent proposal to the school districts. The SWING committee convened two more times to develop their recommendations to the SWSCC based on their consideration of the viability of an institutional network. Their evaluation was based on a study of the applications of the technology, as well as potential interest in the technology by revenue-generating users, as well as nonrevenue-generating users. SUMMARY OF SWING'S FINDINGS The Committee recognizes the unique limitations of coaxial cable I-net applications and the attendant marketing challenges. The following findings have been developed as a result of our study of the technology and economic feasibility of building and mar.keting an I-net in the SW franchise area: o The I-net applications discussed in the company's original proposal and included in the 1981 franchise document are I ' I re e e ... I-net Report September 16, 1988 Page 3 largely obsolete. Some of the technologies were never developed as originally conceived. o Some telecommunications needs are better served by alternative technologies which offer greater capacity, increased transmission speed and eliminate qeoqraphical limitations. o A survey of targeted Eden prairie businesses and government agencies indicated minimal interest in the I-net and an unlikely near-term market among potential revenue-generating users. o There exists a strong interest among members of the Educational Cable Coordinating Committee to cablecast interactive classroom programming on a mini I-net connecting SW schools. However, among school district superintendents, there is no demonstrated commitment for capacity beyond that which may be provided on the residential network. The Committee has been unable to identify any revenue- generating institutional users, either public or private, to support the building of an I-net. If the I-net were built today, it would be wholly-subsidized by the residential subscriber who would not realize any benefit to the residential network. The Committee, therefore, finds that the I-net is not economically feasible in today's market and in the foreseeable future. o o The Committee identifies three costs: 1) a fully-built 166- mile I-net at 3-to-4 million dollars; 2) a 41-mile mini I- net at $643,691; and 3) enhancement of the residential network for institutional uses by nonrevenue-generating public users at $35,321. o The company presently employs one full-time sales engineer, 80% time-dedicated, to market institutional uses to companies in the Southwest and Minneapolis franchise area. Oversight is provided by the local Vice President of Engineering. In addition, the company employs a business network manager at its U.S. corporate level to assist local efforts in the development of I-net business. RECOMMENDATIONS OF SWING In consideration of its findings and charge, SWING made the following recommendations to the Southwest Suburban Cable Commission: . . ... I I-net Report September 16, 19B8 Page 4 1) The requirement to build an I-net in the SW franchise area should be deferred for a minimum of five years or until such time as a sizable base of institutional Users is identified and secured to finance the capital expense without cable subscriber subsidy. 2) Future study of the t,elecoIDmunications market and economic feasibility of the I-net should be at the Commission's discretion. 3) An enhancement of the residential network should be implemented in a 50% cost-split with the participating school districts with a maximum cost contribution by the cable company up to $17,660.50. By the addition of equipment at Rogers' headend, the subscriber network's current capacity for video conferencinq applications will double. With the addition of equipment, not only can two channels be transmitted per city, but once received at the headend, they can be discreetly routed to one or more cities. This doubles the capacity for the school's interactive classroom use. This recommendation permits each district to make an independent decision to participate i~ so desired. Any additional modulators, cameras, televisions or other equipment that may be needed in the schools should be purchased by the school districts. This offer is good until September 1, 1993. PRESENTATION TO SWSCC AND SWSCC~S RECOMMENDATIONS TO MEMBER CITIES SWING presented their report and recommendations to the SWSCC operating Committee and Full Commission in the Fall of 1988p The Full Commission, at their meeting on September 7, 1988, accepted SWING~s first two recommendations and decided to amend the third recommendation concerning funding due to the fact that all institutional Users benefit from the enhancement made to the subscriber network. It is not only a benefit to school districts, but also to the individual cities, as the doubling of capacity will permit the cablecasting of two liv~ programs simultaneously from an individual city which has become of concern to the Member cities. The SWSCC's recommendations to the Member Cities are as follows: 1) The requirement to build an I-net in the SW franchise area should be deferred for a minimum of five years or until such time as a sizable base of institutional users is id~ntified and secured to finance the capital expense without cable subscriber subsidy. e . . I~net Report September 16, 1988 Page 5 2) Future study of the telecommunications market and economic feasibility of the I-net should be at the Commission's discretion. 3) The SWSCC recommends that the enhancement of the residential networK be implemented in a 50% cost share between the SWSCC and the cable company of the $35,321 amount. The Commission, by contributing $17,660.50, is making sure the enhancement is begun prior to transfer of the system and completed shortly thereafter as the ordering of equipment allows. In order to recoup some of the cost in the future from the school districts, requests for channel time on the government and public access channel will be negotiated at a cost to the school districts. The Commission recommends approval by Member Cities of its three recommendations, along with an authorization for the SWSCC to pay the $17,660.50 out of the relief settlement proceeds to be received from Rogers, contemplating future action by the city council on the settlement offer. If, for some reason, Member Cities do not approve the settlement offer of Rogers at an upcoming meeting, the enhancement will be paid in a proportionate amount out of city franchise fees. The SWSCC urges your acceptance of their recommendations, with the Commission's cash contribution to the project in order that the enhancement can proceed in a timely manner. Rogers Cablesystems has committed to completing the project as soon as all five Member Cities approve the Commission's recommendations. SW2 9/16/88 ~ - -