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City Council Minutes 09-30-2013 SpecialMINUTES SPECIAL MEETING — MONTICELLO CITY COUNCIL Monday, September 30, 2013 — 5:00 p.m. Academy Room, Monticello Community Center Present: Lloyd Hilgart, Tom Perrault, Brian Stumpf (acting mayor) Absent: Clint Herbst, Glen Posusta Others: Jeff O'Neill, Mark Pultusker, Wayne Oberg, Rachel Leonard 1. Call to Order Acting Mayor Brian Stumpf called the special meeting to order at 5:02 p.m. 2. Purpose of Workshop: FiberNet Operations Update Brian Stumpf turned the meeting over to Jeff O'Neill who explained that the discussion will look at some of the changes that have taken place at FiberNet and upcoming changes with the gig initiative. Mark Pultusker took over the discussion. He pointed out that his contract with the city expires today and he will continue to manage FiberNet under the current contract for FiberConnect. He would like to use this opportunity to talk about what has transpired over the last year under his management. a. Review of FiberConnect initiatives implemented in the past year at FiberNet. Mark Pultusker stated that he was given the task of analyzing FiberNet to determine what is working and where improvements are needed. He will discuss the initiatives that have evolved. Mark Pultusker pointed out that the competition is much greater now than it was when FiberNet first began operating. There are 2 other triple play providers in town with FiberNet being the first to offer all 3 services of cable TV, internet, and phone. Mark Pultusker explained that his first job was to analyze FiberNet and figure out what had to be fixed to make FiberNet work. He has been working on system upgrades along with staffing, procedures, manuals, and elimination of system outages. Mark Pultusker talked about his decision to reallocate resources and eliminate the sales position. He felt it was most important at this time to concentrate on the existing customers and moving them to the new system rather than solicit more customers until the system is stabilized. He also got approval from council to invest in a contract for consulting services to handle technical issues in lieu of seeking a dedicated employee to do that work. Mark Pultusker stated that he has managed to reduce the operating deficit from about $400,000 to $100,000 by reducing fixed costs in agreements and other operating expenses. He could possibly reduce expenses further but he does not want to affect the services. Mark Pultusker stated that his plan for these changes will result in growth. Special City Council Meeting Minutes — September 30, 2013 Page 1 Brian Stumpf asked if the growth that Mark Pultusker is talking about is to expand the system. Mark Pultusker said he is not looking at expanding the network at this time, but instead adding customers and services on the existing network. Mark pointed out some of the advantages and disadvantages of municipal ownership and discussed some of the competitive issues that the city has to deal with in the areas of pricing, service offerings, and customer service. Brian Stumpf asked Mark Pultusker to explain how the phones are answered at FiberNet. Mark Pultusker said he made the decision to use a recording on the main phone line for FiberNet because it was better for the business. Many of their customers were looking for service outside of normal business hours. He has analyzed the phone calls and adjusts the staffing to accommodate the days and times of most need. Now many customers email their questions and receive answers quickly. b. Description of the upcoming October 10 system upgrade and FiberNet 2.0. Mark Pultusker explained that a new system that he named "FiberNet 2.0" will be introduced throughout the city by making updates from the LCP cabinets to buildings so that customers can take advantage of the new system and software. On October 14, the first move of customers from the old to new system will take place. A group of 32 customers will be in the first (test) group. One of the advantages of the upgrade is to increase the number of TV channels that can be offered. The new system should be much less prone to outages. C. Current and future marketing plus branding including our USP — Unique Selling Proposition (who FiberNet was before and after management changes). Part of the USP of the city is the fact that its customers are only in the city. Customers can receive a higher level of service. Part of the marketing is to showcase FiberNet as a solution provider. As FiberNet provides solutions, this creates customers that stick with FiberNet. Mark Pultusker talked about the data center at the head -end and the ability to offer services for businesses to place their IT equipment in a safe environment. This will be part of the new marketing and branding efforts. Mark Pultusker noted that technology is constantly changing and marketing efforts will take this into account. For example, an I -pad may soon be the control for the electronics in your house. Marketing will focus on achievements of FiberNet such as lower costs of service and provision of gig broadband. Special City Council Meeting Minutes — September 30, 2013 Page 2 d. Creation of FiberNet Business including its new, unique business services: how it benefits the city and its businesses and provides additional revenues. Mark Pultusker stated that this effort is geared toward providing the solutions that businesses need and expect. He noted that the idea for creating FiberNet originated with the local business community. e. Competitive analysis of incumbent service providers and changes to the competitive landscape since the arrival of FiberNet. Mark Pultusker talked briefly about the competition and the provision of customer service. He said he has developed a service plan for people that want to pay for premier service. For example, they could invest in a plan for quicker service at a certain cost. Mark Pultusker also discussed pricing objectives and noted that FiberNet will never be the lowest cost provider. One of the goals is to provide the best value for the price. Mark Pultusker commented on the make -up of his current contract, which is based more on subscribers and not necessarily on revenues and profits that could be gained. Under a new contract, Mark would not take care of regulatory matters as that is not his area of expertise. The city would want to use other sources for those matters. Lloyd Hilgart asked some questions about the infrastructure used by Charter and TDS. Mark Pultusker talked about how copper and fiber can be utilized together depending on the distance needed to reach customers. Jeff O'Neill pointed out that Annandale is in the process of looking at a fiber ring to overcome some of their issues with broadband speed and handed out an article about it. f. Analysis of the impact FiberNet has on service pricing for Monticello businesses and residents: how much is being saved annually pared to other cities and towns. Mark Pultusker talked about the telecommunications business and how capital intensive it is. Wayne Oberg asked about the cash flow needs for FiberNet. Looking ahead, Mark Pultusker stated that it could go as high as $400,000 but would like to keep it between $200,000 - 300,000. This would include losses and capital. Mark Pultusker said he would still bring ideas to Council for independent projects such as the communications tower. Mark Pultusker explained that he and Rachel Leonard have been looking at the service pricing that customers are paying now compared to previous years when there was no competition. He feels that FiberNet is a good investment and good value for the savings provided to city residents and businesses. Jeff O'Neill asked Special City Council Meeting Minutes — September 30, 2013 Page 3 if the market would remain competitive if only Charter and TDS existed in the city (without FiberNet). Mark Pultusker said that he doesn't think that pricing would remain competitive because those two providers would probably increase their prices to similar levels rather than artificially deflate prices as they do now in order to compete with FiberNet. g. The need for additional billingsystem upgrades and costs. Mark Pultusker noted that Rachel Leonard will be working on a new bill format. He anticipates that the billing system will need some future upgrades. h. Parameters for a new FiberConnect management multi -year contract. Mark Pultusker talked about some of the objectives he would like to see incorporated into a new contract. He would like a contract based on his ability to provide solutions for the system that FiberNet uses. He feels it would be better to base the contract on increasing revenues and not just adding customers. He would propose to focus on profitability. Five} year plan and financial requirements to achieve self funding_ Mark Pultusker explained that he would like to work toward developing a five year plan with a capital budget instead of constantly coming to Council to make requests. He will be addressing this in his contract proposal. j. What should FiberNet be in the next 5 years and beyond? How should it be positioned as an asset of the city? Why is it a valuable city asset both now and in the future? Mark Pultusker said he is working on more information to provide to Council and plans to meet soon with Council, possibly in a workshop prior to an upcoming Council meeting. Jeff O'Neill noted that Lloyd Hilgart and Clint Herbst are working as a negotiations team with Mark Pultusker on developing a new contract. 3. Adjournment TOM PERRAULT MOVED TO ADJOURN THE SPECIAL MEETING AT 6:31 P.M. LLOYD HILGART SECONDED THE MOTION. MOTION CARRIED 3 -0. Recorder: Catherine M. Shuman 601 Approved: October 14, 2013 Attest: CitfWinistrator Special City Council Meeting Minutes — September 30, 2013 Page 4