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CITY OF VANCOUVER ADMINISTRATIVE REPORT |
Date: |
February 3, 2004 | |
Author: |
Martin C. Crocker | |
Phone No.: |
7647 | |
RTS No.: |
03908 | |
CC File No.: |
1203 | |
Meeting Date: |
February 24, 2004 |
TO: |
Vancouver City Council |
FROM: |
Director of Information Technology in Consultation with the General Manager of Engineering Services |
SUBJECT: |
Extension of City Telecommunications Duct License Agreement with Urban Networks Inc. |
RECOMMENDATION
THAT the General Manager of Engineering Services and the Director of Legal Services be authorized to negotiate, execute and deliver:
A. a modification of the existing duct licence (the "Licence Agreement") with Urban Networks Inc. ("UNI") to permit an approximately 20 kilometre extension of UNI's fibre optic network in City-owned telecommunication ducts; and
B. a modification of the existing indefeasible right of use agreement with UNI to permit the City, as compensation for the licence to extend its network pursuant to Recommendation A above, to use 48 optical fibres in the entire length of such extension of the network, at an estimated cost to the City of a one-time installation fee of $55,000, the source of funds to be the Information Technology - 2002 Infrastructure Expansion and Replacement Program.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services RECOMMENDS approval.
COUNCIL 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
The purpose of this report is to ask Council to approve a modification to the duct licence agreement ("Licence Agreement") with Urban Networks Inc. ("UNI"). This modification will authorize UNI to extend its fibre-optic network through additional City-owned ducts beyond those already approved by Council. As compensation for such extension, the City will benefit through its right to use 48 fibres of the extended network for its own telecommunications needs.
BACKGROUND
On January 22, 2002, City Council approved a recommendation that:
"The General Manager of Engineering Services and Director of Legal Services be authorized to conclude negotiations, and execute and deliver a license agreement ("the License Agreement") with Urban Networks Inc. permitting it to install and operate a fibre optic network in certain City of Vancouver ducts incorporating the general terms and conditions outlined in this report and such other terms and conditions satisfactory to the General Manager of Engineering Services and the Director of Legal Services."
The City's agreement with UNI has two components:
· A Duct License agreement that permits UNI to install and operate an optical fibre network within certain City underground ducts for a 20-year term, and
· An Indefeasible Right of Use (IRU) agreement that grants the City the right to use a specified number of these optical fibres for its own purposes for the same 20-year term, with UNI responsible for their maintenance and repair.
Under the Licence Agreement, UNI has built an optical fibre network of around 20 kilometres along Hastings Street from Boundary Road, through the downtown core and out to UBC along 10th Ave.
The City has been able to take good advantage of this network through the IRU agreement. At present, the network provides high-speed telecommunications connectivity:
· Between City Hall and the City's data centre at E-Comm;
· Between the Main Street Police building and E-Comm for dispatch purposes, and
· To Firehall #10 (UBC) and Hastings Community Centre.
To acquire these services commercially would cost around $100,000 a year, or $2 million over the term of the agreement. Additional opportunities, in the form of deploying the fibre to other City facilities adjacent to the network route, remain to be developed.
DISCUSSION
UNI and the City have agreed in principle that there would be a mutual benefit to extending the scope of the existing agreement. The City proposes to license UNI to expand their optical fibre network through a further approximately 20 kilometres of City duct, listed in the Appendix.
As compensation for the licence to extend its network, UNI will provide the City with 48 optical fibres throughout the additional licensed duct, creating a network backbone that will enable high-speed connectivity to more than 20 additional City facilities, including the main Park Board office, the VPL main office, Manitoba Works Yard, the Orpheum and Queen Elizabeth Theatres, and a number of community and recreational facilities, branch libraries, fire halls, and fire protection system pump stations. While these facilities have existing telecommunications connectivity, the expansion of the optical fibre network provides both financial and operational benefits:
· Optical fibre offers telecommunications bandwidth (the ability to carry large volumes of information) far in excess of affordable leased services. In practical terms it is unlimited. This permits replacement of obsolete equipment at fibre-serviced locations with shared equipment at the City's E-Comm and Chess Street data centres. Shared equipment is less expensive and more easily managed;
· Some of the existing leased services can be cancelled, with immediate savings in City and Park Board operating budgets rising to around $50,000 per annum by 2006;
· Other leased services will be retained, at least until existing contracts expire, to reduce the dependence on a single communications path and lessen the risk of loss of service in the event of a failure.
Under the proposed extension agreement, UNI will supply the optical fibre at no cost to the City. The City will pay UNI a one-time installation fee of around $55,000 based on the number of kilometres of fibre laid and the number of connections to City facilities. The market value of the optical fibre and installation services is estimated at $200,000.
Final connection of City facilities through the network backbone necessitates laying short sections of optical from the street-based duct system into the buildings, internal cabling and termination, and telecommunications equipment. Estimated costs of these "building laterals" are $225,000, for a total of $280,000. Funding for these costs is available from a network expansion budget and from savings in existing budgets, both operating, related to telecommunications costs, and capital, relating to file server replacements. These funds have all been approved by Council.
Optical fibre can reasonably be expected to have a 20-year lifespan. On a conservative 10-year basis, potential telecommunications and server replacement savings are estimated at $1,000,000.
It is difficult to place a value on the City owned duct infrastructure, or on the value to UNI of this extension agreement. The alternative available to UNI is to use Telus duct. Telus is required by the CRTC to make surplus ducts available at an annual rate of 95 cents per metre. There is no indication that any telecommunication carrier is willing to pay that rate for City duct, which because of its structure is less valuable than Telus duct for most purposes, but that translates to an annual rent of $19,000. As the City derives an immediate construction benefit estimated at $145,000, gets network repair and maintenance included for the life of the contract, and expects to realize an average $100,000 a year in cost savings, staff consider that the City is receiving valuable compensation for use of its duct.
ALTERNATIVES
As an alternative to extending the Licence Agreement with UNI, the City could install its own optical fibre backbone using either internal resources or sub-contracting part of the work. While outright ownership might be seen as desirable:
· The estimated $150,000 - $200,000 cost for the backbone network is significantly higher than the $55,000 payment to UNI;
· The City would have to assume responsibility for repair and maintenance, which would represent an ongoing cost, and
· Unless the City overbuilt the network (at additional cost), there would be no spare capacity to provide optical fibre to businesses and telecommunications service providers in the city.
The UNI arrangement offers the benefits identified at a significantly lower cost.
FINANCIAL IMPLICATIONS
The $55,000 fee payable to UNI will be made from funding approved by Council on May 28, 2002 for networking and telecommunications upgrades, as part of the Information Technology Infrastructure - 2002 Expansion and Replacement Program.
The $225,000 costs of the building laterals will be funded through:
· The Information Technology Infrastructure - 2002 Expansion and Replacement Program allocation to networking and telecommunications;
· The Information Technology Infrastructure - 2003 Expansion and Replacement Program, from savings from the allocation to data storage infrastructure;
· The 2004 and 2005 operating budgets, from telecommunications lease savings, and
· NNR funding for security monitoring.
CONCLUSION
Deploying optical fibre to City facilities offers significant financial and operational benefits and is clearly the telecommunications approach of choice. Extending the existing duct license agreement with UNI offers the City the most cost-effective way of realizing this goal.
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Appendix
New City-owned duct segments to be included in the Licence Agreement with UNI:
From Cordova & Howe south down Howe, east along Hastings, north on Granville, east along Cordova, south down Seymour, east along Smithe, across the Cambie Bridge to City Hall;
From Seymour & Smithe west along Smithe/Thurlow/Nicola/Nelson to the main Park Board office on Beach Ave;
From Seymour & Smithe south down Seymour, west along Burnaby/Drake, under False Creek to Vanier Park, south on Cypress and east along Broadway to City Hall;
From City Hall south down Ontario, west along 69th to the Manitoba Works Yard;
From Cambie and Pacific east along Pacific Blvd to Chess St;
From Seymour east along Georgia to Library Square and Queen Elizabeth Theatre.
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