Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Vancouver City Council

FROM:

General Manager of Engineering Services

SUBJECT:

City Telecommunications Duct License Agreement with Urban Networks Inc.

 

RECOMMENDATION

COMMENTS

POLICY

Execution of legal agreements by the Director of Legal Services and General Manager of Engineering Services with respect to access to City streets requires Council approval.

On July 30, 1996, when dealing with a report on Telecommunications Policies, Council approved a number of goals including one to ensure that the City maintains its authority to regulate equitable access to rights-of-way, secure valuable compensation for their use, minimize negative impacts associated with their use, and utilize them in a manner that furthers other telecommunications policy objectives.
PURPOSE

This report seeks Council approval to authorize staff to negotiate and execute a license agreement with Urban Networks Inc.("Urban Networks") to allow them to install fibre optic cable in certain City of Vancouver (the "City") telecommunications ducts.

BACKGROUND

Urban Networks Inc has a contract with BCNET Networking Society to develop a 42km leased fibre network linking the universities and teaching hospitals in the Lower Mainland of BC. BCNet is a computer network jointly managed by UBC, SFU and UVic to connect institutions of higher learning with business, government and non-profit organizations. This development will provide a private point-to-point network for BCNET featuring the fastest transmission speeds available, along with the highest levels of reliability and security.

Sites connected will include the University of British Columbia Point Grey campus and Robson Square satellite location, UBC teaching facilities at St Paul's Hospital, Vancouver General Hospital and Children's Hospital, Simon Fraser University downtown and Burnaby campuses, British Columbia Institute of Technology downtown and Burnaby campuses.

Part of Urban Networks business plan is to lease additional fibre to other service providers to spread out the capital cost and thus provide the connectivity to BCNET more cost effectively than otherwise would be possible.

The City has a network of existing telecommunications ducts in Vancouver. These ducts provide connections between many city facilities and support civic telephone, data, traffic signal and radio communication systems via copper wire cables. Urban Networks has approached the City to see if we would consider allowing them to use our ducts for the BCNET project in exchange for improved City communications infrastructure and a percent of gross revenue from the Downtown network.

DISCUSSION

The Urban Networks project will provide considerably improved communication to and between Lower Mainland Universities and Hospitals at a reasonable cost.

In addition, the project will provide benefits to Vancouver residents and businesses by making it easier for a variety of telecommunications service providers to reach potential customers. Bridging the "last mile" to customers with fibre has been a challenge for telecommunications providers because of the high cost to install fibre in an urban environment. Urban Networks proposes to overbuild the network required for BCNet and to lease the extra fibre to service providers. By effectively sharing capital costs in this way aless expensive alternative is available to providers to reach their customers. A benefit to the city is that with open access to any interested party and shared use of the fibre, less trenching in city streets is required to provide for multiple telecommunications companies.

At the present time, the City is also looking at its own telecommunications needs. Our existing network of ducts and copper cables has served us well over the years providing telephone, data, traffic signal , and radio system connections throughout the city to civic facilities. The City presently saves over $2,000,000 per year over what the equivalent service would cost using other providers. However, the existing copper cables do not have the bandwidth to support emerging city needs. Fibre can be installed in our ducts and we have installed fibre linking 312 Main st, Fire Hall 1 and City Hall. However, it is expensive for the City to do this extensively on our own. Consequently the short and medium term plan has been to utilize commercial telecommunications providers to service our higher bandwidth communication requirements. While avoiding high capital costs this strategy results in significantly increased operating costs.

The Urban Networks proposal is to provide us with the fibre we would require for anticipated future communication needs in their fibre bundle. This would include not only the runs which would be installed in City ducts but also in the runs placed in alternate facilities. Consequently we would be able to connect civic facilities that are currently reached by our ducts and also a few facilities that currently are not.

Approximately 30 civic facilities are within two blocks of Urban Networks' proposed fibre route. Some examples include E-Comm, Hastings Community Centre, Hastings Library, the Police building at 312 Main St, the main library, City Hall, and Fire Hall 4.

The proposal would provide virtually unlimited band width to the City at connected locations much sooner than otherwise would be possible and would result in some short-term capital savings and considerable long-term operating budget savings due to the foregone need to purchase additional bandwidth from telecommunications providers.

The Urban Networks proposal does not limit the flexibility of the City in the future use of our ducts. The cable required to service Urban Networks needs as well as our own is approximately the same diameter as the cable we would install if we were only serving city needs. In addition, it would be a requirement of our agreement that Urban Networks install their cable in such a way that additional cables can be placed in the same ducts in the future.

The proposed outline of the terms of an agreement are included as appendix 1 (on file in City Clerk's Office) and are summarized as follows:

- The City will grant Urban Networks the right to place a fibre optic cable in specific ducts listed in appendix 1 for a term equal to the shorter of twenty years or the useful life of the fibre.

- Urban Networks will provide up to 48 fibres to the City in all city ducts used for their network. If fewer than 48 fibers are required, the City may allocate the equivalent fibre meters to any part of the network whether in city ducts or not in order to provide continuity.

- Urban Networks will pay to the City 2% of gross revenue derived using fibre in the downtown peninsula Fire Protection System ducts with the exception of BCNet revenues. No percentage of gross revenue or other fee for use will be payable for the remainder of the City ducts licensed to Urban Networks.

- Urban Networks will prepare the City allocated fibre in a fibre splice case ready for splicing at locations designated by the City.

- The City will be responsible for connections from the splice case to civic facilities.

- Fibre will be installed in such a way that existing City cables can be removed without damage to other cables.

- Fibre will be installed in such a way that additional cables can be placed in the ducts in the future.

- Routes that have not been occupied within three years of signing an agreement will cease to be part of the agreement.

Staff feel that the Urban Networks proposal to install fibre optic cable in some city telecommunications ducts in exchange for dark fibre and revenue on the Downtown portion provides significant benefits to the City and should be pursued.

FINANCIAL IMPLICATIONS

There are over 100 civic facilities, such as fire halls, libraries and community centres, dispersed throughout Vancouver. Corporate Services is currently, as approved by Council on June 5, 2001, upgrading telecommunications services to a number of these sites using a combination of commercial services and new City owned and installed wireless and fibre infrastructure.

For a few of the approximately 30 facilities that are close to Urban Networks' proposed fibre route, the Urban Networks fibre will provide a short-term alternative to the City installing its own fibre. These savings are estimated at $100,000. The real benefit will be realized in the longer term. The Urban Networks proposal offers:

The present value of the savings and revenues over 20 years is estimated to be $2.0 million.

The City could achieve similar savings without the participation of Urban Networks. However it would cost us an additional $500,000 to $600,000 in capital costs to install the fibre on our own.

There would be no additional operating costs with the Urban Networks proposal. The additional termination equipment would be required with any of the options to improve bandwidth and consequently would not be an additional cost as a result of this proposal. Maintenance of the fibre if required would be the responsibility of Urban Networks. There could be some cost savings as usage of City owned copper wire declines.

It is difficult to place a value on the City owned duct infrastructure. The alternative available to Urban Networks is to use Telus duct. Telus is required by the CRTC to make surplus ducts available at a fixed rate of about 90 cents per meter of duct. Using this formulae, the length of city owned duct that is proposed to be used would yield $16,000 per year in rent. Over 20 years this would amount to a present value of about $180,000 which is considerably less than the value the City would derive from the current proposal. Therefore staff consider the Urban Networks proposal to provide good value to the City for use of the City asset.

CONCLUSION

Staff recommend that Council allow Urban Networks to install fibre optic cables in certain City telecommunications ducts in exchange for dark fibre and revenue as described above subject to the execution of a license agreement to the satisfaction of the General Manager of Engineering Services and the Director of Legal Services.

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