Executive Summary. Background. DATE: March 5, Kit Carson Electric Cooperative. Federal Communications Commission (FCC) Staff

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1 DATE: March 5, 2014 FROM: TO: SUBJECT: Kit Carson Electric Cooperative Federal Communications Commission (FCC) Staff Expression of Interest Rural Trials Docket No Executive Summary Kit Carson Electric Cooperative and its subsidiary, Kit Carson Telecom, headquartered in Taos, New Mexico seeks $48.8 million to provide high speed broadband to 26,000 rural residents, 2,300 businesses, 117 anchor institutions and 6 Native American Pueblos in eight rural, remote Northern New Mexico counties. The project will leverage over $10 million of our own investment and expand the last mile reach of two BTOP projects, The North Central New Mexico Economic Development District for REDI Net middle mile project and the TewaCom Broadband Initiative for the San Illdefonso Pueblo. We will extend and deploy the same gigabit fiber-to-the-premise (FTTP) architecture which is being built to serve our 24,000 electric cooperative members through a prior BIP grant. Background Kit Carson Electric Cooperative (KCEC), a member-owned, non-profit cooperative, serving 20,500 households, 3,600 businesses, 183 community anchor institutions, public safety entities, and critical community organizations, and two Native American Pueblos in Taos, Rio Arriba and Colfax counties in Northern New Mexico. KCEC has been providing electric service to the northern New Mexico area for almost 75 years. Over the years we have been instrumental in bringing positive change to our community. We have been providing wireless internet and telephone service to selected members since We have also provided satellite Internet service, but find these solutions inadequate for our members, business, and anchor institution s needs. Kit Carson Telecom is a registered ISP and CLEC in the state of New Mexico. Kit Carson Telephone currently does not have an ETC license; however, we intend to file with New Mexico Public Regulation Commission. We are fully committed to a fiber solution as we have found other platforms to be less-reliable and of insufficient capacity and speed. The company intends to leverage this existing support infrastructure to expand its current customer platforms. 1

2 Northern New Mexico submitted three applications for federal stimulus funding under Round 2 of the Broadband Opportunities Technology Program (BTOP) in the Department of Commerce and the Broadband Initiatives Program (BIP) in the US Department of Agriculture. Kit Carson Electric was awarded an ARRA/BIP funded $44.7 million grant and a $19.1 million loan to build a fiber-to-thehome network to serve its members. The project is approximately 60% complete. The open access network will bring high speed Internet and VoIP telephone to our members beginning later this summer, followed by IPTV in early In addition to communications and other uses, the project will support smart metering, distributed generation and smart grid/green grid for Kit Carson Electric. KCEC is a partner in REDI Net (Northern New Mexico Regional Economic Development Initiative). REDI Net is a high-speed, open access broadband middle mile network for northern New Mexico owned and operated by a consortium of local and tribal governments through the North Central New Mexico Economic Development District. Like our fiber-to-the-home project, REDI Net supports the multiple purposes of economic development, education, health care and sustainable energy development. KCEC handles the billing, support and administration functions for REDI Net. REDI Net applied for and received $10 million in BTOP funding for a middle-mile fiber network that covers Rio Arriba, Los Alamos and northern Santa Fe counties, the City of Española and the Pueblos of Ohkay Owingeh, Santa Clara, San Ildefonso, and Tesuque. Other KCEC and REDI Net partners include Jemez Mountains Electric Cooperative, Rio Arriba County, Los Alamos County, the City of Espanola, Northern New Mexico College, and Los Alamos National Security. We request $48.8 million to leverage our existing infrastructure investment and our strong relationships with the community, tribal governments, and other public/private northern New Mexico partnerships to extend last mile broadband and telephone services to approximately 26,250 additional unserved Northern New Mexico residents, 2,300 businesses, 117 anchor institutions and 4 additional Native American Pueblos, including: a. Remote unserved areas of our cooperative, b. Adjacent portions of other nearby rural electric cooperatives, and c. Expanded last mile opportunities covering Tribal lands and unserved communities along the REDI net middle mile network that connects with the KCEC fiber network in Hernandez and extends southward to Santé Fe. 2

3 Geographic Territory (Description, size, Census Block Numbers, number of customers to be served and density) Eligible High Cost Locations Extremely High Cost Locations Annual Support State County CountyName TractID NM Colfax $65, NM Colfax $22, NM Colfax , $734, NM Rio Arriba $51, NM Rio Arriba $114, NM Rio Arriba $144, NM Rio Arriba , $710, NM Rio Arriba , $740, NM Rio Arriba $3, NM Rio Arriba $25, NM Rio Arriba $203, NM Rio Arriba $52, NM Taos $38, NM Taos $82, NM Taos , $402, NM Taos , $590, NM Taos $52, NM Taos $339, ,644 2,277 $4,375,

4 Springer Harding NM Mora $46, NM San Miguel $26, NM San Miguel $5, NM San Miguel $27, NM San Miguel $587, NM San Miguel $415, NM San Miguel $44, NM San Miguel $11, NM Union $0.00 Mora San Miguel NM Guadalupe $0.00 NM Santa Fe $71, NM Santa Fe $11, NM Santa Fe $38, NM Santa Fe $21, NM Santa Fe $119, NM Santa Fe $21, NM Santa Fe $1, NM Santa Fe $67, NM Santa Fe $29, NM Santa Fe $34, NM Santa Fe $17, NM Santa Fe $32, NM Santa Fe $40, NM Santa Fe $8, NM Santa Fe $24, Jemez Mountain NM Sandoval $ NM Sandoval $499, NM Sandoval $21, NM Sandoval $11, NM Sandoval $190, NM Sandoval $1, NM Sandoval $21, NM Sandoval $17, NM Sandoval $447, Anchor Institution Focus These funds will enable us to enlarge our existing fiber network footprint to serve and connect the smaller, but equally critical community libraries, remote health care facilities, primary and secondary 4

5 educational facilities, public safety and government operations within our expanded service area. This is especially true of our plan to provide last mile connections to leverage and extend the reach of the REDI Net middle mile network. This expansion dovetails with our existing focus to create a northern New Mexico broadband network to connect rural clinics to regional hospitals like Holy Cross Hospital in Taos, create distance learning opportunities in conjunction with the University of New Mexico, Taos and Northern New Mexico Community College, Espanola and link rural (and often remote) public safety, emergency service, homeland security and forest service/fish and wildlife offices. According to a Rio Arriba County official, Rio Arriba County suffers significantly higher unemployment rates than its neighboring Counties of Los Alamos (2x higher) and Santa Fe (1.3x higher). A recent independent survey reveals that Lower Middle Income households represent more than 51% of the community. Efficient and affordable high speed broadband represents a critical economic development opportunity and a priority of the County. While the middle mile broadband infrastructure provided by the REDI Net Initiative provided the citizens, businesses and institutions of the county with great possibilities, ultimately the benefit and impact will only be as good as the last mile. Therefore, the County of Rio Arriba, through its Economic Development Department, stands committed to support an open access fiber solution as being proposed by Kit Carson Telecom. Such commitment includes outreach to secure necessary anchor institutions and to further facilitate such development accordingly. Proposed Technology and Future Scalability KCEC is building a last mile, open access wireline, gigabit passive optical fiber network (GPON) along our electric distribution right-of-way to bring advanced broadband services to unserved residents. This fiber network will also enable Smart Grid technologies, including AMI and AMR, revitalize local economic development and create sustainable jobs for our members and communities. We are planning on offering triple play internet, VoIP telephone and IPTV services over the fiber-tothe-home network. Our initial residential speed offerings will start at 10 x 10 Mbps for $40 per month, 20 x 10 Mbps for $50 per month, and 100 x 50 Mbps for $120 per month. We do have plans to offer Gigabit services within five years to our residential customers if demand is indicated. We are prepared to offer a 5 x 1 Mbps package at lower monthly prices to low income/special circumstance groups with prior approval. We will also offer competitively priced packages to small business/small anchor customers. Large anchor institutions and large commercial businesses will be offered the ability to receive secure, point-to-point Gigabit connections immediately. Our current Internet drain is a 2 Gigabit pipe burstable to 10 Gigabits. Our transport fiber infrastructure is a redundant 10 Gigabit ring. Our current expected maximum residential offering tops out at 100 Mbps but is expandable to 1 Gbps in the future. Our current point-to-point commercial offering is up to 1 Gbps but is expandable to 10 Gbps in the future. We have the capacity to expand to 10GPON if future demand is warranted and the expected life of the fiber infrastructure is 30 years. No other technology can offer the scalability and life expectancy of fiber. 5

6 State and/or Local or Tribal Government Participation in and/or Support for Project We are currently in discussions with the State of New Mexico and the New Mexico Economic Development Commission for possible broadband funding. Locally, we have strong relationships with the Native American Tribal governments. KCEC provides electric service to the Native American communities at Taos Pueblo and Picuris Pueblo. The REDI Net middle mile network passes the Pueblos of Ohkay Owingeh, Santa Clara, San Ildefonso, and Tesuque. However, few, if any last mile providers have extended high speed Internet and phone services to residents of these communities and no provider offers the value of price/speed that we expect to offer as we leverage and expand our fiber-to-the-home network. As a member-owned, non-profit organization, Kit Carson Electric Cooperative has a long history of partnering and supporting small and disadvantaged businesses and institutions in our service area, including SBA 8(a) socially and economically disadvantaged small businesses. KCEC continually looks to form collaborative partnerships with organizations like the local chambers of commerce, the state economic development agency, the New Mexico Regional Small Business Development Centers, statewide Minority Business Development Centers, Minority/Women/Native American Development Centers and their Women s Economic Self-sufficiency Team in Taos, to support current businesses, to help facilitate new business start-ups or expansions. KCEC, in cooperation with the Taos Business Alliance and other community organizations, helped create more jobs for our citizens. KCEC was recognized by the Association of Commerce and Industries and was awarded the VIVA Award. The Viva Award is presented to companies in New Mexico that have demonstrated Vision, Investment, Vitality and Action. The qualities are valued for their positive contributions to the New Mexico Economy. KCEC also was a Nova Award recipient for efforts to improve safety and create new economic, educational and technological opportunities for disadvantaged towns of North Central New Mexico. KCEC has also collaborated with the University of New Mexico, Taos and the Taos Municipal Schools in Taos Valley and the Native American Taos Pueblo to sponsor and conduct green jobs projects and training for local residents. The project leverages the Cooperative s existing rights of way and infrastructure, which reduces costs and accelerates deployment. Our project is sponsored by the State of New Mexico, REDI, and the University of New Mexico as a last mile demonstration project. KCEC s infrastructure is one component of a regional open network for northern New Mexico that seeks to address the following opportunities: 1. Regionalism will be used to overcome persistent barriers associated with rural broadband deployment, cost-efficiencies and access to long-haul fiber. 2. Open networking will make broadband more affordable and spur innovation and job creation. 3. Support of economic development efforts currently being implemented by REDI, including job creation through home-based or location-neutral businesses in high paying sectors. 4. Support of multiple uses, including economic development, education and distance learning, health care and telemedicine, and the use of smart grid/green grid and distributed 6

7 generation by electric utilities. The distinguishing feature of our cooperative organization is that we have been serving these government constituents for years. We have positive, existing relationships with these and other local community agencies. Existing Providers With the exception of the higher home density communities within the northern New Mexico footprint who are served by antiquated terrestrial DSL (hybrid fiber-copper plant) and Cable Modem service (hybrid fiber-coax plant) providers like Comcast and CenturyLink/Quest, there are few, if any existing broadband providers serving the remote low-density communities we propose to serve and no broadband providers who have the scalable ability to provide gigabit services to homes and businesses in the future. We expect the geographic service overlap to be less than 5% of the total square miles of our expanded service area. Project Timeline KCEC is shovel-ready. We have completed approximately 60% of the BIP project network. The balance of the project is 100% designed and construction is expected to finish by December 31, We are prepared to start the engineering study and design to extend the network beyond the KCEC footprint to reach unserved portions of the following adjacent rural electric cooperatives: Mora San Miguel, (Guadalupe, Mora, San Miguel and Santé Fe Counties), Northern Rio Arriba (northern Rio Arriba county) and Jemez Mountain, (Sandoval, Rio Arriba and Santé Fe counties) and communities and tribal lands located within the REDI-Net middle mile footprint (Colfax, Los Alamos, Mora, Rio Arriba, San Miguel, Sandoval, Santa Fe, and Taos counties KCEC is prepared to start the project immediately and will complete it within forty eight months. We own our rights-of-way and our partners control their rights-of-way. We don t anticipate any political or financial hold-ups negotiating right-of-way issues to delay the start of construction. 7

8 1. KCEC currently has the physical facilities necessary to house the network equipment and does not anticipate that it will require additional land or facilities. 2. All key construction, equipment and head-end contractors and vendors are on board and working. 3. The design and construction has already been evaluated and approved by the RUS, and it uses RUS-approved components. 4. KCEC has extensive experience with government projects. We know what to expect, how to access and account for the money, and how to comply with government audit and oversight regulations 5. The fiber network follows the existing pole grid, with minimal ecological and environmental disruption. Our design is also green, since it does not require excessive power to amplify or repeat signal delivery. 6. KCEC has obtained internet bandwidth from a long haul fiber provider and is connected to the provider s point of presence (POP) to the Phoenix, Arizona National Internet Peering Point via redundant paths. Total Utility Investment To date KCEC has spent over $10.0 million for system improvements to support the build out and expansion of our fiber network and telecom operations equipment and infrastructure, including $2.0 million to build and equip the headend/central office, network operations center (NOC) and remote hub locations. In addition, over a three-year period we are providing an additional $1.8million of financial and in-kind support under our partnership with REDI Net. All of these assets will enable us to expand our fiber reach into these additional unserved/underserved areas. One Time Capital Infrastructure Investment Needed We are requesting $48.8 million to build an additional 2,000 miles of last mile fiber-to-the-home network plant in order to expand services to serve an additional approximately 26,250 additional unserved Northern New Mexico residents, 2,300 businesses, 117 anchor institutions and 4 additional Native American Pueblos. 8