City of Ketchum Broadband Strategic Plan Executive Summary Report September 12, 2013
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1 City of Ketchum Broadband Strategic Plan Executive Summary Report September 12, 2013 City of Ketchum Broadband Strategic Plan Executive Summary Report Page 1 Magellan Advisors, LLC 2013
2 Introduction Ketchum, like many rural and remote communities, faces obstacles gaining access to broadband services that are comparable to those found in many of our country s metropolitan markets. Ketchum s small resident population, remote location and specific topography create challenges in delivering the same services found in urban centers. This doesn t mean that Ketchum is without broadband services. Local telecom and cable companies cover the vast majority of Ketchum s residential districts with cable modem and DSL services. These same providers also deliver a limited amount of fiber-optic services in Ketchum s business corridors. Broadband in Ketchum is a critical asset that the community requires to support local businesses, residents, schools, libraries, healthcare and public safety. As a rural community, Ketchum relies more heavily on broadband services than communities that are more urbanized, due to its remote location. Many services available in urban brick-and-mortar environments can only be accessed over the Internet in Ketchum. This means that Ketchum needs reliable, highspeed access to online services that support the needs of the community. In addition, Ketchum must plan for its long-term future and ensure the City is technologically equipped to support the needs of residents, businesses and community anchors. Specific to Ketchum s business community, support for advanced broadband services is a critical factor for economic development, enabling Ketchum to attract new businesses and retain existing businesses. As more of their daily transactions are completed online, the importance of reliable infrastructure that transports Internet, voice, video, cloud and other business-centered applications is critical to maintain their daily operations. As the digital economy continues to expand, broadband will become an ever-increasing need for businesses, large and small. For Ketchum s businesses, access to advanced broadband services that support high-bandwidth applications will be critical in the long-term to ensure the community keeps pace with other areas where broadband services are advancing at a faster pace, namely larger metropolitan environments. Not every business in Ketchum needs access to advanced broadband services, however, those that do require it should have available options for fiberoptic connectivity at prices they can afford. For these businesses, access to dedicated, fiberoptic broadband provides them with the speed and reliability they need to support their operations and remain competitive. When compared with communities of similar size and in similar locations, Ketchum is served comparably from a broadband perspective. However, the challenge facing Ketchum and similar communities is how to expand the availability of advanced broadband services at affordable rates to local users who require these services. In Ketchum, costs to procure fiber-optic services are very high and there is a lack of last-mile fiber-optic capacity in the downtown corridor. Ketchum s short construction season, high cost of construction and remote location result in extraordinarily high costs for service providers to build fiber-optic network in the area. When they do, service providers pass this cost onto end users in the services they procure from the providers, either as one-time costs or as monthly costs, bundled into their service charges. This is a standard practice in the broadband industry as service providers must be able to recoup their costs of delivering services to customers and generate a reasonable return on investment. In Ketchum, where the costs to deploy advanced fiber-optic broadband are high, it is prohibitively expensive for all but the largest businesses and community anchors in Ketchum to procure these services. This issue, coupled with several public policy issues (described below) that may hinder broadband construction in the area results in limitations in expansion of advanced broadband services in Ketchum. City of Ketchum Broadband Strategic Plan Page 2
3 Key Issues for Broadband Expansion Ketchum, like many rural and remote communities has specific geographic and demographic issues that result in local challenges surrounding the availability and affordability of broadband services. These issues are explained in the section below, and comprise both supply-side and demand-side issues for local broadband. Key Issue #1. Short Broadband Construction Season Northwestern communities with severe winter weather suffer from short construction seasons that are sanctioned by the timing of snowfall and frost in the community. During these seasons, construction is very difficult and costly and often times cannot be accomplished given severe winter conditions. For Ketchum, this results in a period during the year when little if any broadband construction can occur, which limits the development of new broadband infrastructure, including conduit infrastructure, fiber-optic cable, copper cable and related facilities. Key Issue #2. High Cost to Build Broadband Infrastructure As identified by both the telecommunications providers serving Ketchum and local construction firms, the cost to build broadband infrastructure in Ketchum is significantly higher than similar communities. Construction costs for conduit infrastructure that carries fiber-optic services in the downtown corridor is approximately three times higher in Ketchum than in similar communities. The factors contributing to this high cost include: An abundance of rock in the Ketchum area, which makes construction using boring or trenching significantly more difficult than in areas with loose ground; A lack of open ground in downtown Ketchum which results in a significant amount of penetration through asphalt and concrete; Key Issue #3. City Ordinances Limiting Construction Activities Broadband project meetings with local service providers and City staff uncovered several potential policy issues that may inhibit the development of broadband in Ketchum. The first of these is the restriction on construction activities during the high summer season when Ketchum s civic events are taking place. The City s policy limits construction in the downtown corridor during this period, which shortens even further the already compressed broadband construction season. The second is a perceived issue with the City s current policies around construction methods, which require telecom providers to follow strict guidelines for placement of broadband infrastructure. In speaking with local service providers, the perception is that Ketchum s strict policies on construction of utility infrastructure results in higher construction costs for them, which drives up the cost of broadband in Ketchum and inhibits general broadband development. Key Issue #4. Fluctuating Demand Due to Seasonal Populations Ketchum s small resident population and high seasonal population is a key issue that impacts the long-term development of broadband in the City. Broadband infrastructure in Ketchum is planned to accommodate the full-time residents of the City, as they are the broadband users who establish service with local service providers. Seasonal residents and visitors will generally not establish full time service with local service providers, as they may only be in Ketchum for several months of the year, and in many cases, will suspend their local service when they leave. This impacts the service revenues received by local service providers and inhibits their abilities to expand investment their local infrastructure. City of Ketchum Broadband Strategic Plan Page 3
4 Key Issue #5. Remote Location, Far from Metropolitan Markets Ketchum s remote location is a regional issue that the City faces for future broadband expansion. Ketchum suffers from high costs of critical fiber-optic backhaul services due to the significant physical distance between Ketchum and the nearest metropolitan market, Boise, ID. This requires that local providers purchase miles of fiber-optic backbone capacity to reach the telecommunications centers in Boise, where Internet, voice and other services are routed. This results in higher operating costs for Ketchum s local service providers. Key Issue #6. Perceived Issues Around What Services Are Available In many of Magellan s community meetings, local businesses reported a lack of information from providers about what services are available in the community. On several occasions, businesses mentioned that they were unclear what services were available to them. These discussions centered on the availability of fiber-optic connectivity versus cable or DSL services and whether businesses could procure fiber-optic connectivity from local service providers. Community Strategies to Enhance Broadband Magellan has identified key strategic initiatives that the City may undertake to foster an environment where broadband development can more easily occur, in cooperation with local service providers. These include short and long-term strategies that can be implemented in phases, more fully described in the City of Ketchum Broadband Strategic Plan, which will follow this Executive Summary. Strategy #1. Implement Broadband-Friendly Public Policy Magellan recommends that the City adopt comprehensive broadband standards that enable a process whereby the City can install basic broadband infrastructure through its capital project program. Road widenings, water/sewer, sidewalk and lighting projects all may be opportunities for the installation of basic conduit infrastructure at a very low cost. By installing conduit in concert with these related capital projects, the City can avoid incurring the significant costs of constructing this infrastructure by doing so when the ground is already open. For example, if a water or sewer line is scheduled for replacement, the City has the opportunity to install conduit along side the new pipe when the ground is already open and bear the costs of trenching only once. Since the majority of costs to build broadband infrastructure in Ketchum are incurred through trenching and boring, this strategy can alleviate the high cost of implementing local broadband infrastructure within the City. It s important that the City determine which projects will help build usable broadband infrastructure; there s no reason to utilize this strategy in areas that already have available conduit and fiber. Magellan recommends implementing a process through which the City can evaluate its capital projects to determine which ones should be identified for the addition of broadband infrastructure. Magellan also recommends that the City implement this process in its land development code or engineering standards to ensure that broadband infrastructure becomes a part of the design for all relevant capital projects. From here, the City can determine which projects add relevant broadband infrastructure to Ketchum and which do not. Magellan also recommends that this process be coordinated with local service providers to ensure that Ketchum does not create an environment where significant overbuilding of infrastructure occurs. City of Ketchum Broadband Strategic Plan Page 4
5 In addition to comprehensive broadband standards, Magellan suggests that the City evaluate its current policies around general and utility construction within the City. As documented in Key Issue #3, current policies may increase the cost of building broadband infrastructure in Ketchum. Magellan recommends the City evaluate its construction restrictions imposed during the high season and potentially allow for variances when broadband construction is involved. In addition, Magellan suggests that the City review, clarify and streamline its policies for construction with local service providers, to ensure the City s policies do not become obstacles for broadband expansion. Strategy #2. Utilize Strategic Public Infrastructure Assets Magellan s evaluation of Ketchum s public infrastructure has uncovered several important opportunities to expand broadband in the downtown corridor. This analysis has identified that the Ketchum Springs Water System may be a resource that the City can utilize to lay underground conduit and fiber-optic infrastructure throughout the downtown area. As this water system is retired, the water pipe can be furnished with new conduit and fiber-optic cable at a significantly lower cost than would be realized if the City were to build this infrastructure from scratch. Additional conduit may also be available from projects that were completed by Idaho Power and is now usable by the City. Further, the City has installed a small amount of its own conduit in conjunction with other capital projects. These infrastructure systems together may provide a new resource for underground conduit and fiber-optic capacity in Ketchum. Utilizing this infrastructure could potentially bring more fiber-optic capacity into the downtown, which could then be utilized by local service providers to reach more businesses in the area. Long-term, it could mean a significant footprint of new broadband infrastructure that may be used to provide fiber-optic services to businesses, residents, government and other organizations. In cooperation with local service providers and through a multi-year expansion plan, this infrastructure may become a foundation for broadband services through much of the community. Initially, it would effectively reduce the cost of fiber-optic capacity in downtown; those savings could then be passed on by service providers to end users. Using an open-access model, whereby the City would provide this fiber-optic capacity equally to all local service providers, providers would have a new local fiber-optic resource to reach more business customers. Instead of incurring large costs to build fiber in Ketchum, and passing those costs on to end users, local service providers would lease last-mile fiber from the City at low rates to reach more business customers. And, the City would benefit by repurposing a retired public asset to drive additional value in the community. An initial analysis has been completed on this infrastructure to determine its adequacy for new broadband infrastructure, which has come back positive. Further analysis will need to be completed by the City to gain a thorough understanding of its capabilities and the cost to install new broadband infrastructure in this system. Magellan has proposed a series of next steps in the Action Plan and Resources section of the Broadband Strategic Plan that highlights the work required to determine the sufficiency of this infrastructure. Strategy #3. Educate the Business Community and Empower Economic Development A key finding from Magellan s study of the Ketchum area was that businesses did not always understand the broadband options available to them. Magellan recommends that the City build awareness of broadband services that are available in the area, particularly as it looks to City of Ketchum Broadband Strategic Plan Page 5
6 implement broadband initiatives in the community. Building awareness will help drive higher broadband adoption, which is important for Ketchum as a tech-oriented community and to support general economic development. Increasing the demand for broadband services will also help local service providers, as they are able to generate additional revenues that may at some point be reinvested back into system expansions for the local infrastructure. Magellan recommends that the City and local service providers work together more closely to ensure businesses know what services are available in the local market and providers are aware of the opportunities at hand. Strategy #4. Identify Strategic Broadband Grant and Loan Programs Federal grant and loan programs have been instituted to promote the expansion of broadband, primarily targeting communities in rural America. These programs are generally centered on key community functions such as public safety, education or healthcare. In many cases, rural communities, in partnership with private service providers can secure federal grants to build needed broadband infrastructure in their communities. Some of these programs include the Department of Commerce s FirstNET Program, the Federal Communication Commission s Connect America Fund, The Obama Administration s recently announced ConnectEd Program and the Federal Communication Commission s Healthcare Connect Fund. Magellan suggests that Ketchum stay abreast of these programs as a key initiative in the Broadband Strategic Plan and move forward to identify for which programs the City and greater Blaine County area may qualify. In these cases, Ketchum will have a stronger position to secure such grants when collaborating with other public agencies in the area, which may include the City of Hailey, the City of Sun Valley and Blaine County. Strategy #5. Collaborate With Other Public Agencies on Technology Initiatives Collaboration between Ketchum and its neighboring communities on broadband and general technology initiatives will help drive a groundswell of demand for services within the greater Wood River Valley. In small communities, the concept of aggregating demand for broadband services can help drive new supply of infrastructure in rural markets. Magellan recommends that the City identify opportunities for collaboration around technology and broadband projects where common needs exist between the communities. Strategy #6. Incorporate Broadband and Technology into Ketchum s Comp Plan Magellan believes that broadband is only one component of ensuring that Ketchum is a technology-oriented community, equipped for the digital economy. As communities become more connected through technology, they need to incorporate master planning into their processes to take advantage of and support this evolution. Broadband is the foundation that enables many emerging civic technologies such as smart grid, green energy and smart home. By instituting broadband and technology as a pillar of Ketchum s comprehensive plan, the City can develop initiatives that will support long-term evolution toward these important factors that are transforming communities. City of Ketchum Broadband Strategic Plan Page 6
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