Digital Houston Initiative

A Wireless Network for the Region

CITY OF HOUSTON
MuniWireless: Texas07

Richard Lewis
CIO, City of Houston

March 5, 2007
1

Business Community Interest in CITY OF HOUSTON Digital Houston Initiative BROADBAND ACCESS
In August of 2004, the Greater Houston Partnership (GHP) formed a Focus Group of Corporate CIOs to Investigate the Condition of the Regions IT Infrastructure By January 2005, the Focus Group Recommended that the GHP Create a Technology Infrastructure Task Force (TITF) to Address Infrastructure Needs for the Region

In March, the TITF stated its VISION :

Communities Fully Integrated by a Regional Wireless Network allowing Instant Access Anytime Leveraging Education, Health Care, Transportation, Public Safety and Community Non-Profit Investments in IT Applications Promoting Economic Development, Innovation and Productivity Improvements
2

CITY GOVERNMENT RESPONSE

CITY OF HOUSTON
Digital Houston Initiative

In October 2005, Mayor White responded to the Report by announcing that the City would release an RFP for the private Financing and Management of such a Wireless Infrastructure City Staff who have been Following the Development of this Technology have been Organized into a Project Team and a Nationally Recognized Consultant has been Engaged for this Effort A Competitive Proposal Process has been Executed to Realize this Vision that the GHPs Technology Infrastructure Task Force (TITF) has Outlined
3

CITY GOVERNMENT OBJECTIVES

CITY OF HOUSTON
Digital Houston Initiative

REDUCE / AVOID GOVERNMENT COST of MOBILE DATA DEVICES

( $600k Yearly Increasing to $2m )

DIGITAL DIVIDE ACCESS and EDUCATION ENHANCEMENTS

( i.e. more students with home access )

INCREASE CONSUMER CHOICE and MAKE MORE AFFORDABLE

( previously $30 to $50 down to $10 to $20 monthly, fixed, nomadic and mobile )

PROMOTE ECONOMIC DEVELOPMENT

( Conventions, Tourism & the Bohemian Effect for Young Professionals )
4

BUSINESS MODEL:

CITY OF HOUSTON
Digital Houston Initiative

PUBLIC / PRIVATE Partnership

City Government uses its substantial Real Estate holdings and rights to Electric Utility as an Inducement

Private Partner makes a $40 to $50 million dollar investment in Wireless Broadband Technology for the Houston Region and DESIGNS DEPLOYS MANAGES NETWORK

Parties agree to Wholesale Rate & other Key Business Terms

FUTURE PUBLIC SECTOR APPLICATIONS

CITY OF HOUSTON
Digital Houston Initiative

TRANSPORTATION RELATED
TRAFFIC SIGNALS PARKING METERS

PUBLIC SAFETY
POLICE REPORTS POLICE VIDEO and PHOTOS FIRE BUILDING PLANS SECURITY SURVEILLANCE REDUNDANCY for WIRED NETWORK during DISASTERS

INFRASTRUCTURE MAINTENANCE & SUPPORT

WORK ORDER COMPLETION / UPDATE METER READING for UTILITIES
6

FUTURE PUBLIC SECTOR APPLICATIONS

(continued)

CITY OF HOUSTON
Digital Houston Initiative

FIELD INSPECTIONS
BUILDING CODE FIRE CODE HEALTH CODE CITY CONSTRUCTION PROJECTION NEIGHBORHOOD CODE

AVL for CITY VEHICLES and GPS FEDERAL HIGHWAY ADMINISTRATION has LICENSED RADIO FREQUENCY SPECTRUM for use in AUTOMATED VEHICLES SPEED CONTROL
7

FUTURE PUBLIC SECTOR APPLICATIONS

(continued)

CITY OF HOUSTON
Digital Houston Initiative

Other Public / Private Applications

SCHOOL RECORDS ACCESS
Grades, Attendance, Reports, Homework Assignments, etc.

TELECOMMUTE and WORK at HOME TELEMEDICINE for CHRONIC ILLNESSES T1 ALTERNATIVES for BUSINESS CONNECTIVITY LOW COST CELL PHONE REPLACEMENT

REQUIREMENTS
COVERAGE
( 95% of City Outdoor ) ( 90% of City Indoor )

CITY OF HOUSTON
Digital Houston Initiative

OPEN ACCESS
( Any ISP for Retail )

MULTI-USE
1. 2. 3. Public Service Public Access Public Safety 1. 2. 3.

SECURITY
Physical Virtual Encryption, etc.

NETWORK INFRASTRUCTURE PRIVACY & COMPLIANCE

CUSTOMER SERVICE SERVICES, PROVISIONING & PRICING

9

Go to: http://www.houstontx.gov/it/wirelessrfp.html to see, starting on Page 21

Evaluation/Selection Process Evaluation / Selection Process

CITY OF HOUSTON
Digital Houston Initiative

EVALUATION CRITERIA Value to the Community Value to City Government Financial Capacity Experience Deployment Strategy & Plan MW/DBE TOTAL

POINTS

25 10 10 30 25 P/F 100

10

Evaluation/Selection Process Evaluation / Selection Process

CITY OF HOUSTON
Digital Houston Initiative

Continued

VALUE TO THE COMMUNITY a. FINANCIAL PLAN I. Economic / Financial Projections (Soundness) * II. Community Inclusion Programs Investment
* Evaluation performed by Outside Investment Banking Firm

b.

RATES I. Wholesale Rate (1 Mbps minimum) II. Retail Rate for Low-Income (1 Mbps minimum)
( Objective Mathematical Ratings )

VALUE TO CITY GOVERNMENT

(Compensation for Use of City Assets)

I. II. III.

Free and/or Discounted Accounts Up to 5% Free Public Access (Parks, etc.) Bandwidth, Capacity, Speed
11

Evaluation/Selection Process Evaluation / Selection Process

CITY OF HOUSTON
Digital Houston Initiative

Continued

FINANCIAL CAPACITY * Financial Strength Ability to Sustain Long-term Capital Investment Similar Pending Commitments Key Executives / Partners / Ownership Structure
* Evaluation performed by Outside Investment Banking Firm

EXPERIENCE - References, Services, Organizational Capabilities - Technical Architecture / Quality of Service Plan DEPLOYMENT STRATEGY & PLAN Strategy / Approach Project Plan and Methodology Coverage Timeline

MW/DBE PARTICIPATION - Pass / Fail based on 24% Good Faith Efforts

12

COMPETITIVE SELECTION PROCESS

CITY OF HOUSTON
Digital Houston Initiative

The City of Houston Received (5) Proposals

Each Proposal has 1 Prime Contractor and Multiple Partners Over 25 Companies Participating 7 of the Participants are Fortune 500 Companies

Evaluation / Selection Process

Numeric Ratings Complete Negotiation Meetings commenced in August with 2 Top Rated Proposers

13

Evaluation/Selection Process Evaluation / Selection Process

CITY OF HOUSTON
Digital Houston Initiative

Continued

PHASE 1 Initial Rating PHASE 2 Short List & 2nd Rating Not Needed
(Optional Based on # of Proposals & Complexities of Proposed Solutions)

PHASE 3 Top 2 Rated Proposers Invited to Negotiations on Key Deal Terms

14

NEGOTIATIONS

CITY OF HOUSTON Digital Houston Initiative

The Mayor directed Negotiations on Key Deal Terms in a Manner typical of Competitive Commercial Deals Both Firms responded to City requirements with the Understanding that No Final Decisions or Recommendations would occur until all Principal Terms were Agreed to This occurred over Six Months with the Mayor, Information Technology Department Executives and the Citys Financial Advisor Actively Engaged Private Sector Executives Affiliated with Greater Houston Partnership were consulted on Commercial Perspectives, with Experience being cited as one of the Key Factor for Success Earthlink is being Recommended for Negotiation of a Definitive Agreement that should move quickly and is Posting a $1 Million Letter of Credit as Security and Good Faith
15

OTHER FACTORS

CITY OF HOUSTON Digital Houston Initiative

Earthlink is financing the project out of available Cash, while Convergent has represented a highly leveraged debt structure, $86.5% Debt $13.5% Equity Citys Financial Advisor worked with Convergent to maintain the competitive environment, although a firm commitment to financing did not occur Earthlink committed to commence work upon approval of the Term Sheet with key personnel in Houston In addition, Earthlink is decentralizing its National Marketing into a Regional Framework with Houston potentially becoming a Regional Office for service to Houston, New Orleans, Corpus Christi, etc. 16

ESSENTIAL TERMS OF DEAL

CITY OF HOUSTON
Digital Houston Initiative

Network Operator to Finance, Design, Build, Operate and Maintain the Network at its Sole Expense Deployment of the Network will be Completed Within 24 Months of the Effective Date of the Definitive Agreement Network Operator Must Provide Security to City to Ensure the Implementation is Performed According to Schedule, i.e. $5 million Letter of Credit with Minimum % Completion Milestones at 12 and 24 Months with a $2.5 Million Draw Penalty at Each Milestone and Strong Termination Provisions Wholesale Rate May Not Exceed $12 Monthly for the First Seven (7) Years

17

ESSENTIAL TERMS OF DEAL (continued)

CITY OF HOUSTON
Digital Houston Initiative

The Parties will Collaborate on the Digital Inclusion and Network Marketing in the First Two (2) Years with the Network Operator Providing $2 million Cash and/or In-Kind (GAAP Compliant) Contribution for this Purpose Network Operator will Pay the City 3% of ALL Subscriber Gross Revenue on an Annual Basis to be used for Inclusion Programs and to Defray the Citys Program Management Expense Network Operator will Provide Coverage for 95% of the City Outdoors and 90% of the City Indoors, CPE Devices Provided for Each
12 Month Subscription and Rental Rate of $4 per Month for Low Income

MW/DBE Participation Goal is 24% of the Service (Labor) Portion of the Network Cost, Excluding Hardware and Software (MW/DBEs may Participate by Providing Hardware, Software or Services)

18

ESSENTIAL TERMS OF DEAL (continued)

CITY OF HOUSTON
Digital Houston Initiative

City will Provide Assistance for Facilities/Leaseholds for Base Stations ( 100-130 Locations ) Network Operator will Pay up to $14,400 Annually for Each City Base Station Location Network Operator will Negotiate a Definitive Agreement with the Citys Electric Utility Franchisee Consistent with the Term Sheet Approved by the City and CenterPoint Energy The City Commits to a Minimum of $500,000 in Annual Network Usage for City Government Operations after Network Completed
19

ESSENTIAL TERMS OF DEAL (continued)

CITY OF HOUSTON
Digital Houston Initiative

Network Operator to Provide Free Access for Up To 5% of the Citys Geographic Area (i.e., Parks, Libraries and Health Centers) Acceptance Test Plan to Focus on Speed, Availability/Reliability, Coverage and Security of Network Service Level Agreement to Require Reliability, Availability, Upgrades, Open Access to Wholesalers, Privacy, Security, etc. Coverage will also Exclude Areas where Electricity and Suitable Mounting Platforms are not Available, with Annual Review of Excluded Areas Term is for Ten (10) Years with Two (2) Five (5) Year Renewal Terms

20

CITY OF HOUSTON
Digital Houston Initiative

Transportation, Infrastructure & Aviation (TIA) Committee Briefings

DATE March 9, 2006 TIA Committee June 15, 2006 TIA Committee July 13, 2006 TIA Committee September 14, 2006 TIA Committee December 14, 2006 Special City Council Meeting February 15, 2007 TIA Committee

STATUS

RFP Process Update on Digital Houston Update on Digital Houston WiFi RFP Evaluation Update on Digital Houston Update on Digital Houston Update on Digital Houston
21

WiFiMesh & WiMAX

WiFi Mesh & WiMAX

CITY OF HOUSTON
Digital Houston Initiative

100 to 130 Base Stations Approximately 10,000 to 15,000 Access Nodes with as Gateway Nodes
22

Source: Civitium, LLC

CITY OF HOUSTON NEXT STEPS

Digital Houston Initiative

Council will be asked to Approve the Term Sheet, Triggering Earthlinks Delivery of a $1 Million Letter of Credit Definitive Agreement to be Negotiated by the Parties over the next 30 Days Definitive Agreement between CenterPoint Energy and Earthlink, based on November 2006 City/CenterPoint Term Sheet Earthlink to perform Preliminary Lease Effort and Radio Frequency Analysis

23

24

Digital Houston Initiative

A Wireless Network for the Region

QUESTIONS ANSWERS

25