FiberNet Advisory Board Agenda Packet 06-03-2015 SpecialAGENDA
FIBERNET MONTICELLO ADVISORY BOARD SPECIAL MEETING
Wednesday, June 3, 2015 — 7 a.m.
Academy Room, Monticello Community Center
Members: Brian Stumpf, Charlotte Gabler, Jon Morphew, Dennis Sullivan, Jacob Kramer
Others: Jeff O'Neill, Dan Olsen, Rachel Leonard, Bryan Rabe
1. Call to Order
2. Recommendation regarding contract with Yondoo for video services
3. Recommendation regarding strategy for deploying enhanced ONTs
4. Monticello/Windom cooperative cost saving ventures update
• Recommendation regarding agreement with Windom for purchasing bandwidth
• Letter of intent to Windom regarding Metaswitch
5. Next Meeting — Tuesday, June 9th, 2015
6. Adjourn
I.
II.
FiberNet Monticello and Potential Agreement with Yondoo
FiberNet Monticello Video
Currently video is an obstacle to FiberNet's financial independence because:
a. It's expensive to provide
b. It requires frequent upgrades to equipment
c. It requires significant staff time for operations and maintenance
d. The local market is competitive
e. It is undergoing shifts as consumers weigh the benefits of opting out of traditional
television options in favor of streaming options.
Because of these factors, FiberNet is facing diminishing subscriber numbers and
escalating costs. In recent years revenues have not been enough to cover the cost of
providing the service to the Monticello community.
Monthly Annually
Total Revenue $56,341.39 $676,096.68
Total Costs $60,995.33 $731,943.96
Total Loss -$4,653.94 -$55,847.28
It is no longer feasible to continue operating at the status quo. FiberNet's budget
cannot support the upgrades necessary to match the competition, but it would risk
losing subscribers if video service were eliminated. However, there is a relatively
recent, less -traditional model; a third party hosted provider called Yondoo that could
offer FiberNet a way to retain video service for subscribers.
Yondoo Video Services
Yondoo is a subsidiary of CSI Digital, a current video vendor for FiberNet. The
business model behind Yondoo has existed as various parts for many years, but they
recently pulled everything together into a new hosted video model.
In the hosted video option FiberNet connects to Yondoo's super-headend by an
existing fiber feed. FiberNet continues to install, bill, and provide tech support for
FiberNet video subscribers; however, Yondoo is responsible for the content,
hardware, licensing, and software. This allows FiberNet to continue offering the
service at a significantly reduced cost.
Yondoo
Equipment& Software
Maintenance
Programming Contracts
III. Impact on FiberNet
FiberNet
Installations
Billing
Tech Support
There are several essential outcomes of a Yondoo agreement that would positively
impact FiberNet.
a. Reduced Costs: By utilizing the Yondoo hosted model many current costs for
video would be eliminated, most would be eliminated immediately. For example,
instead of paying CSI Digital each month for software and support, trouble
tickets, etc., FiberNet would be billed per Yondoo subscriber. This cost would be
covered by the subscribers' monthly payments for video service.
In addition to these costs, FiberNet would see a reduction in budgetary items like
the energy bill. By using the Yondoo headend, FiberNet could remove equipment
from the headend in Monticello which reduces energy consumption. There is also
possibility for resale value of the sold equipment.
MONTHLY NETWORK FEES
Vendor
Monthly
Annually
Notes
Vubiquity
$779.50
$9,354.00
PPV and VOD- out of service still in contract
Vaultus
$150.00
$1,800.00
Cross connect fees
CSI Digital
$2,700.00
$32,400.00
Fiber feed from Portland
CSI Digital
$2,500.00
$30,000.00
Software and Support
CSI Digital
$250.00
$3,000.00
Trouble Tickets (cost varies per month)
Minerva
$2,166.67
$26,000.00
Software and Support
Total Network Costs 1
$8,546.17
1 $102,554.00 1
Eliminated under Yondoo
MONTHLY PROGRAMMING FEES
(Based on billing information from May 2015)
(Costs vary depending on the number of subscribers)
Vendor Monthly Annually
Local Broadcast Channels $6,345.33 $76,143.96
NTTC $33,809.91 $405,718.92
NBCU $4,596.97 $55,163.64
Direct Pay Channels
$6,194.07
$74,328.84
FOX Retail
$87.50
$1,050.00
Premium Channels
$554.00
$6,648.00
Bulk Premium
$513.05
$6,156.60
Music Choice Digital Music $348.33 $4,179.96
Total Programming Costs $52,449.16 1 $629,389.92
Notes
Majority of the channels
Approximately 20 channels
Includes Fox Sports
Except Starz & Encore
Hotels
Eliminated under Yondoo
b. Enhanced Video Service: The greatest obstacles to gaining and retaining video
subscribers is the lack of features and aging equipment. However, these
complaints are addressed by the features offered by Yondoo.
IV.
In addition, the pricing for Yondoo features and equipment matches current
market rates. FiberNet's is several years old which makes the sale of certain
services, such as HD, more difficult in a competitive market.
SERVICE UPGRADES
FiberNet Yondoo Notes
Set -Top Boxes X X Updated version with Yondoo
DVR X X Updated version with Yondoo
Whole Home DVR X X
HD X X
TV Everywhere X
Video on Demand X
Pay Per View X
Premium Channels X X
c. Updated Pricing Model: One of the most significant legacies of the past is the
existence of promotional pricing on video subscriber accounts. It would very
difficult to correct or update these promotional prices individually, but
transitioning to Yondoo would update each bill and ensure that FiberNet is
covering its costs.
d. Economy of Scale
FiberNet's current video system is reliant on a high number of subscribers to
cover the network, equipment, and maintenance costs. The past five years have
shown that without consistent, considerable reinvestment in the system, this
number of subscribers is not plausible.
Using Yondoo reduces FiberNet's individual reliance on the number of
subscribers to make video profitable. FiberNet pays for the subscribers we have;
Yondoo in turn takes the responsibility for high subscriber counts and spreads
them out among several client networks.
Yondoo Agreement
The specific elements of the Yondoo agreement include:
a. A minimum term of 3 years (necessary for programming rights which operate in
3 year cycles). With the 3 year term capital startup costs apply immediately.
b. Option for a 5 year term. Under the 5 year term FiberNet has 2 options to waive
capital startup costs:
1. FiberNet would have 18 months to achieve 1,000 video subscribers. If
that number is met, the fees are waived. If not, the startup costs would be
due.
2. FiberNet could opt to waive the monthly IRU payment ($3 per subscriber)
until 1,000 video subscribers are achieved. At that point the IRU payment
would be reinstated.
c. Within the agreement FiberNet agrees to provide Yondoo with access to the
network. In return, Yondoo would provide FiberNet with an IRU payment of
$3.00 per subscriber.
d. FiberNet will continue to bill customers directly for their video service. Yondoo
will submit a monthly bill to FiberNet based on the number of subscribers and
their video packages.
e. FiberNet will continue to collect and distribute Cable PEG fees as established in
the franchise agreement.
V. Challenges
The long-term effect of an agreement with Yondoo has the potential to have a
significant positive impact on FiberNet subscribers and the budget. However, there
are challenges that should be acknowledged.
a. In order to cover the costs of its monthly payment to Yondoo, FiberNet must
ensure customers are billed at Yondoo's prices. This means higher package prices
and lower equipment costs; some subscriber bills will decrease and some will
increase depending on the specific elements of the subscriber's bill. This also
means most existing promotions and discounts will be eliminated in favor of
Yondoo's pricing structure. It will be challenging to ensure all subscribers' bills
have accurate Yondoo pricing, but it is the only way FiberNet will ensure revenue
to cover its own costs to Yondoo.
b. Due to the changes in customer bills, there is the potential for a short-term loss of
video subscribers. Staff anticipates a recovery of subscriber rates over time due to
the improved product offering, but there is no way to guarantee that.
VI. Summary
The Yondoo hosted video option allows FiberNet to significantly reduce the costs of
providing video while enhancing the service offered to the Monticello community.
The transition would be a challenge, and there would likely be an initial decline in
video subscribers, but there is a strong likelihood the hosted option would make
FiberNet stronger over the long-term.
VII. FiberNet Advisory Board Options
a. Recommend signing the Yondoo agreement for hosted video services with the
terms as presented in the original document. FiberNet would need to reach 1,000
video subscribers within the first 18 months to have the set-up costs waived or
would have to budget for those costs in the 2016 budget.
b. Recommend signing the Yondoo agreement for hosted video services with the
option to waive the monthly IRU payment to cover the start-up costs. Once
FiberNet reaches 1,000 video subscribers then the monthly IRU payment would
be reinstated.
c. Recommend rejecting the agreement with Yondoo for hosted video services.
Calix GigaCenters
Currently, FiberNet requires several pieces of equipment to provide residential service:
A. ONT
B. Cyber Power
C. Router (internet customers)
As a cost-saving measure FiberNet re -uses equipment from disconnected subscribers at new
properties; however, the current stock of ONTs is depleted and the older equipment is beginning
to fail. FiberNet will need to purchase new ONTs in 2015.
Staff has examined the options for purchasing new ONTs and recommends purchasing a new
Calix product called a GigaCenter. FiberNet already uses Calix ONTs, but GigaCenters are less
expensive, require fewer pieces of equipment, and provide an enhanced experience for
subscribers. In addition, staff has prepared a long-term strategy for recovering the cost of the
GigaCenters, something that has not previously been used for ONT purchases.
Cost
ONT $350.00 GigaCenter $320.00
Cyber Power $48.00
Router $90.00
Total $488.00 Total $320.00
GigaCenters cost less than traditional ONTs. Staff requests to use money budgeted for capital
expenses in 2015 to pay for the GigaCenters. These funds would be used to purchase ONTs
regardless of whether the new or old model of ONT is approved.
Staff also recommends instituting two new subscriber fees. The first is a GigaCenter Gateway
Fee which is similar to the current router rental fee and the second is an early termination fee;
both would offset the cost of purchasing the equipment.
Equipment
The GigaCenters are more efficient because they combine previously separate pieces of
equipment into a single item. This is less expensive for FiberNet to provide and requires that
customers have fewer pieces of equipment in their homes.
Also, since GigaCenters are installed inside the homes, this equipment is not exposed to the
weather conditions like traditional ONTs. This should help extend the life of the equipment.
Features
GigaCenters offer an enhanced experience for subscribers as well as benefits to FiberNet's staff
and budget.
For Residential Subscribers
• Stronger wireless signal throughout the whole house
• Capability for more devices at peak performance
• Capability for higher symmetrical speeds (up to a gig on wireless)
For FiberNet
• Takes advantage of the new E7 platform
• More efficient troubleshooting
• Fewer truck rolls means money saved on tech support
• Less wiring during installs means time and materials money saved
• Potential to add features like wireless set-top boxes
Deployment
Based on the lower cost, need for less equipment, and enhanced customer experience, the
FiberNet Advisory Board is asked to consider recommending the following GigaCenter
deployment plan to the Monticello City Council.
1. Funds are allocated from the capital equipment portion of the FiberNet budget to
purchase GigaCenters.
2. All new subscribers are installed with a GigaCenter (approximately 20-25 per month).
a. All new subscribers have a GigaCenter Gateway fee of $15.99 on their account.
This helps cover the cost of the equipment and also entitles the customer to free
service calls on the FiberNet equipment.
b. All new subscribers sign an installation form agreeing to pay an Early
Termination Fee if they cancel service within 2 years. The cost of the ETF is
15.99 x number of months remaining in the 2 year term. This is just a fee- it is not
a residential contract.
3. Existing subscribers would receive a GigaCenter if they request it.
a. They could retain their current equipment with no change to their bills.
b. If they opt for the GigaCenter for a better experience, they would agree to the
same terms as new subscribers: the GigaCenter Gateway Fee and the Early
Termination Fee.
4. Existing subscribers with ONTs that fail would have a choice.
a. They could have their old ONT replaced with a used ONT for no additional cost.
b. They could have a new GigaCenter installed with the same fees as a new
subscriber.
Based on this plan, money from the budget would be used for an initial capital expenditure on
the new equipment. However, the cost of the GigaCenters would be recovered within 2 years
with the gateway fee or through the early termination fee. After 2 years, the gateway fee
becomes revenue.
Please note, if the use of GigaCenters is successful, FiberNet will need to continue to purchase
enough equipment to cover new installs. As with the current system, FiberNet would recycle any
disconnected GigaCenters at new residences. However, staff and the advisory board will need to
continue to monitor how the continued purchase of equipment impacts the 2015 budget and
include the cost of GigaCenters in the 2016 budget. Use of this equipment will have a short-term
effect on the budget since the funds to cover the initial costs are recovered over a 2 year period.
XO Price/M = $7.00
Windom Price/M = $1.20
For Final Year of the XO Agreement:
Additional Per Month: $1,600.00
Additional for the Year: $19,200.00
However, this includes significantly increased internet capacity to offset increased
internet traffic with the expectation that costs will decrease significantly after
the completion of the XO agreement in 2016.
Vaultas History
Nov 2014 Dec 2014
Jan 2015
Notes:
The Vaultas invoice would also be reduced under the yondoo video
Monthly Pmt.
$4,749.00 $4,400.00
$4,400.00
option- it would be reduced by $150.00 per month.
-$349.00
XO History
Aug 2013 Dec 2013
Oct 2014
May 2015
Notes:
The price for XO was reduced once during an agreement renegotiation and then reduced again
Circuit 1 Pmt.
$9,327.47 $4,991.26
$5,004.87
$5,230.12
when FiberNet began utilizing MICE in 2014. Incremental increases are due to
increased
Circuit 2 Pmt.
$7,596.22 $1,819.44
$2,256.59
$1,918.42
bandwidth usage.
Vendor
Jun 2015 Jul 2015
Aug 2015
Sep 2015
Oct 2015
Nov 2015 Dec 2015 Jan 2016 Feb 2016 Mar 2016 Apr 2016
May 2016
Jun 2016
Jul 2016
Aug 2016
XO (Comb.)
$7,148.00 $7,148.00
$7,148.00
$7,148.00
$7,148.00
$7,148.00 $7,148.00 $7,148.00 $7,148.00 $7,148.00 $7,148.00
$7,148.00
$7,148.00
$0.00
$0.00
(1 Gig)
Vaultas
$4,400.00 $0.00
$0.00
$0.00
$0.00
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00
$0.00
$0.00
$0.00
$0.00
Windom
$0.00 $6,000.00
$6,000.00
$6,000.00
$6,000.00
$6,000.00 $6,000.00 $6,000.00 $6,000.00 $6,000.00 $6,000.00
$6,000.00
$6,000.00
$6,000.00
$6,000.00
(10 Gig)
Total
$11,548.00 $13,148.00
$13,148.00
$13,148.00
$13,148.00
$13,148.00 $13,148.00 $13,148.00 $13,148.00 $13,148.00 $13,148.00
$13,148.00
$13,148.00
$6,000.00
$6,000.00
$1,600.00
-$7,148.00
XO Price/M = $7.00
Windom Price/M = $1.20
For Final Year of the XO Agreement:
Additional Per Month: $1,600.00
Additional for the Year: $19,200.00
However, this includes significantly increased internet capacity to offset increased
internet traffic with the expectation that costs will decrease significantly after
the completion of the XO agreement in 2016.