ADMINISTRATIVE REPORT

                                           Date: February 27, 1997
                                           CC File No. 5806-1

   TO:       Vancouver City Council

   FROM:     General Managers of Corporate and Engineering Services

   SUBJECT:  Broadband RFI  -  Selection of a Business Partner



   RECOMMENDATION

        A.   THAT Rogers Communications be invited to develop a
             public/private partnership model in conjunction with City and
             School Board staff as the next step in the process of
             selecting a Broadband Network partner, along the lines
             discussed in this report, and should that process fail for
             whatever reason, that BC Telephone be invited to participate
             on the same basis immediately thereafter;

             FURTHER  THAT the other firms who submitted proposals in
             response to the City's RFI be immediately notified of this
             decision through an appropriate de-briefing letter from the
             City; and

             FURTHER THAT staff be instructed to report back to Council at
             the conclusion of a Memorandum of Understanding (MOU) for
             approval of that agreement, along with appropriate
             recommendations and estimated costs to proceed into the
             Partnership Trial. Similar approvals will be sought from the
             School Board as well.

        B.   THAT Teleconsult be engaged as the City's consultant to assist
             staff with the development of a public/private partnership
             model at an estimated cost of $100,000 inclusive of
             out-of-pocket expenses and GST, with funds provided from the
             Strategic Initiatives account in the Operating Budget, noting
             that this cost will be shareable between the participating
             parties under a sharing arrangement documented in the MOU.

        C.   THAT the City Manager be authorized to approve additional
             staff costs associated with the development of a Memorandum of
             Understanding at a total estimated cost of $15,000, with funds
             provided from the Information Technology Replacement account
             in the Operating Budget. 



   CITY MANAGER'S COMMENTS

        The City Manager RECOMMENDS approval of A, B and C.


   COUNCIL POLICY 

   Council is the appropriate body to establish corporate policy in the
   telecommunications area.

   Council is the approving body for contract awards of over $300,000. 

   The decisions made this day will likely lead to a partnership agreement
   having a value well over the $300,000 approval threshold.


   PURPOSE

   The purpose of this report is to bring Council up-to-date on the results
   of the City's Broadband Network Partnership RFI process and to recommend
   proceeding to the next stage of implementation around selecting a
   business partner. This step will involve prototyping the business
   relationship and formalizing that relationship in a partnership
   agreement for subsequent review and approval by Council.  

   Additionally, we note that the Vancouver School Board, having immediate
   needs to connect its schools and administrative facilities with a
   broadband telecommunications network and the appropriate funding in
   place, has indicated a strong desire to participate with the City in the
   development of a public/private partnership model, and would like to
   establish a communications link to a number of its schools as one of the
   pilot projects for the partnership trial. Moreover, the School Board has
   committed to have all of its schools connected to the network by June,
   1998.


   BACKGROUND

   On July 30, 1996, Council recognized the increasingly important role
   that telecommunications plays in the economy of the city of Vancouver
   and adopted a leadership policy for the corporate City around the
   following telecommunication policy goals:

        -    facilitate rapid deployment of advanced
             telecommunications services, not only to support
             City operations, but to facilitate communications
             between the City and its citizens and its
             businesses;

        -    encourage the development and use of advanced
             telecommunications services to stimulate broader and
             deeper participation in local government;

        -    work towards making access to advanced
             telecommunications services equitable and affordable
             to all citizens and businesses;

        -    develop, use and promote advanced telecommunications
             services to allow for more efficient delivery of
             City services;

        -    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; and,

        -    influence the regulation of telecommunications in
             Canada to the benefit of municipal government and
             its constituents.


   In approving the above-noted policy goals, Council instructed staff to
   explore alternative business models for creating a broadband
   telecommunications network by issuing a RFI (request for information) to
   potential partners in the telecommunications sector, and to report back
   the results.

   Staff, with the assistance of the City's consultant for this project
   (Teleconsult), prepared a RFI document based on the principles embodied
   in Teleconsult's Broadband Network Feasibility Study (on file with the
   City Clerk's Office) and the City's telecommunications policy goals, and
   issued the RFI on October 31, 1996 with a closing date of November 29,
   1996. Teleconsult was given conduct of the RFI process and dealt
   directly with questions from the proponent community up to the closing
   date.

   In total, five responses were received to the City's RFI on a Broadband
   Network Partnership from the following proponents.

        - Rogers

        - BC Telephone Company

        - BSC Broadband Solutions Corp.

        - MetroNet

        - CellularVision Canada Ltd.

   Four of the submissions were of good to excellent quality and responded
   appropriately to the questions posed in the City's RFI document.

   The submission from CellularVision Canada, however, was put aside in the
   first round of evaluation as being incomplete. The firm cited business
   reasons for its brief (one page) response.

   The four remaining proponents were advanced to the second round of
   evaluation, as discussed below.


   DISCUSSION

   The quality of the responses the City received to its Broadband Network
   Partnership RFI essentially led staff and Teleconsult to believe that
   neither the lease nor the build/own/operate business models were
   appropriate for the City. Moreover, in terms of the RFI itself, we
   pointed out to potential proponents that the City could, instead of
   taking a more normal route of issuing an RFP, short-cut the process and
   negotiate directly with a preferred candidate(s), leading to a
   partnership agreement for Council review and approval, if a proposal had
   considerable merit.

   With the foregoing in mind, City staff (the City Manager, the General
   Managers of Corporate and Engineering Services, and the Utilities
   Management Engineer) and Teleconsult met with each of the four
   proponents during the month of December in the second round of
   evaluation. These meetings afforded the opportunity for each proponent
   to "showcase its wares" and for staff to ask questions on the
   proponent's responses to the RFI to clarify comments and/or direction.
   As well, the proponents asked questions of the City. In terms of these
   discussions, each of the proponents suggested that it would be
   advantageous to the City and themselves to have the School Board
   involved in the roll-out of a comprehensive broadband communications
   network, recognizing that the City and the School Board are logical
   public sector partners having a commonality of interest and a
   significant combined purchasing power.

   In the third and final round of evaluation, staff and Teleconsult met in
   early January/97 to make a decision around a preferred/favoured
   proponent to recommend to Council. We immediately established that the
   four proponents fell into two categories - the larger, mature firms
   represented by Rogers and BC Telephone with more or less ubiquitous
   installed networks, and the smaller, fledgling firms represented by BSC
   and MetroNet.  Given the City's evaluation criteria and scoring process,
   the smaller firms were set aside at this time on the basis that the
   larger firms could provide almost immediate connectivity to a city-wide
   communications network.  We note, however, that should the partnership
   trials prove unsuccessful with the two larger firms, the City could
   entertain a similar partnership trial with either or both of these
   smaller firms.


   In terms of the larger firms, Rogers and BC Telephone, a seven point
   rating system was used to rank each firm. Staff felt that the Rogers bid
   won out on the basis of its superior broadband service depth and its
   perceived ability to meet the City's policy objectives in a shorter time
   period, although the two larger firms were very close in ranking and the
   decision was difficult. The Rogers' bid was innovative and seemed to
   provide a better basis for the development of an ongoing relationship
   with the City, and that view was shared by the consultant as well.

   In the final analysis, the joint venture business model with a private
   partner was selected as the preferred option. Staff then approached the
   School Board inviting them to  partner with the City in the development
   of a public/private sector partnership model. The School Board indicated
   a strong desire to participate supported, in part, by its plans to
   implement a broadband telecommunications network in the immediate future
   to connect all of its schools and administrative facilities, for which
   funding is in place.

   The role of the City and School Board in a joint venture business model
   would be one of ROW providers and anchor tenants, with a view to
   encourage deployment of competitive and enhanced network services to
   citizens, students and businesses. Additionally, a joint venture
   relationship would reduce the public partners' capital investment
   requirements, and alongside that, the business risk of implementing a
   leadership policy in broadband telecommunication services. Conversely,
   we also recognize that a public/private partnership must be managed, and
   managed well, if the deemed benefits to the public partners flowing from
   the relationship are to materialize. There may, as well, be
   opportunities and problems associated with the public interest to
   influence the regulation of telecommunications in Canada (at the CRTC
   table) in order to facilitate the widest and most rapid deployment of
   advanced telecommunications services at competitive prices. All of this
   suggests that an appropriate partnership agreement must be negotiated
   before implementation in order to clearly spell out the obligations of
   the parties (the City, School Board and their private partner),
   compensation/contributions of each of the parties to the agreement,
   performance criteria and measurements, and an acceptable dispute
   resolution process.

   We are therefore recommending that Rogers be invited to participate in
   the next step of the selection process as discussed below, and should
   that prove unsuccessful for whatever reason, that BC Telephone be given
   the same opportunity to participate.  We did consider and discuss
   whether the City/School Board should attempt to move further down the
   road with two firms concurrently, instead of one, but neither we nor
   they believed that the resource allocation commitment to proceed on that
   basis could be justified.


   NEXT STEP

   The next step of the selection process for a Broadband Network partner
   involves the development of a public/private partnership model, jointly
   with the School Board, that will reflect the essential elements of a
   working partnership agreement. The results will be reported back to
   Council/School Board for consideration and approval at appropriate
   points in the process. 

   In terms of getting the work plan on a strict time line and with stated
   deliverables that all parties (the City, School Board and Rogers) may
   evaluate along the way, the model would incorporate the following items. 
    

   1.   Memorandum of Understanding

   The City, School Board and Rogers (the "Partner") will develop and
   execute a Memorandum of Understanding (MOU) within sixty days of a
   mutually agreed start date.  If this timing is not met, the City will
   invite BC Telephone to participate on the same basis.

   The MOU would embody these guidelines:

        -    the City's objective to negotiate a partnership
             agreement jointly with the School Board and a
             private partner who is able to satisfy the terms and
             conditions of the Partnership Trial (discussed
             below) within a stated time frame;

        -    the nature of the relationship to be created as a
             result of the partnership agreement, especially
             regarding the purchasing intentions of the City and
             the School Board in regards to network facilities
             and telecommunications equipment;

        -    the milestones and deliverables each party is to
             achieve in the Partnership Trial; and,

        -    the resources that the parties will contribute to
             achieving the objectives of the Partnership Trial,
             any ongoing benefit the Partner may derive from
             completion of the Partnership Trial, and the
             circumstances under which the parties may exit the
             process and the notification required.  


   2.   The Partnership Trial

   The timing for completion of the Partnership Trial activities may be
   from six to nine months in duration, after a mutually agreed start date.


   The Partner will be required to deliver the following items to the City
   and the School Board over the term of the Partnership Trial, with
   appropriate assistance provided by the City and the School Board as
   documented in the MOU.

   a)   Pilot Projects - the choice of pilots would be agreed on by the
        City, School Board and the Partner. These pilots are intended to
        allow the Partner to demonstrate its ability to deliver new and
        innovative services that the City and/or School Board could use in
        its operations.

        The areas of City and School Board interest for pilot projects
        include:

             -    basic telecommunications facilities - e.g., connecting
                  two or more facilities and/or buildings with a high
                  capacity communications pipe for the trans-mission of                  voice, data, graphic images and video.  

             -    telephony - e.g.,  advanced land line and/or cellular
                  communications.

             -    telemetry - e.g., monitoring pumping stations, water
                  flows, and traffic signals.

             -    public service - e.g., a community channel application.

             -    physical plant - e.g., an application using the City's
                  underground network in conjunction with broadband
                  technology.

             -    policy objectives - e.g.,  an application using two-way
                  coaxial technology to test the benefits of telecommuting
                  as a means to turn down traffic volumes.

             -    operations support - e.g., a number of pilots around
                  kiosk technology for paying parking fines or applying for
                  a parking permit; hand-held wireless devices to
                  communicate directly with City data files to issue
                  parking tickets, tow away scoff-law offenders, enter
                  field inspection data and others.

             -    education - e.g., an application that involves the School
                  Board and a City department.  The School Board has also
                  indicated a strong desire to pilot the connection of a
                  number of schools in a city neighbourhood with a high
                  capacity, broadband telecommunications network as a top
                  priority, and to complete the network by June, 1998.  

   b)   Service Delivery Plan - the Partner will develop a vision and a
        plan for service delivery that will form the basis of the
        partnership, incorporating feedback from extensive discussions with
        the City, School Board and community representatives.

   c)   Technical Design  -  the Partner will develop a conceptual network
        design to support the service delivery plan.

   d)   Organizational Model  -  the Partner will develop an organizational
        model that identifies how the partnership will be structured and
        maintained, including a corresponding structure for the City and
        the School Board.

   e)   Measurement/Performance - the City, School Board and the Partner
        will determine what will be measured and the measurement criteria
        that will be used.

   f)   Access/Rights of Way -  the City and the Partner will develop a
        suitable Municipal Access Agreement for the use of the City's
        streets, lanes, bridges, land and buildings, and other facilities,
        including appropriate compensation arrangements. The School Board
        will negotiate a similar arrangement for its facilities (buildings
        and property).


   3.   The Partnership Agreement

   The partnership agreement is the product of a successful completion of
   the Partnership Trial and will outline the services to be provided by
   each of the parties over the term of the agreement, which is nominally
   set at five years at this point. The agreement will spell out the
   obligation of all parties, compensation/contributions of each of the
   parties, performance expectations and measurement criteria, a dispute
   resolution process, and other normal terms and conditions. 


   CONCLUSION

   On July 30, 1996, Council adopted a leadership policy in the area of
   broadband telecommunications and approved six policy goals to further
   implementation. As a first step down that road, staff issued a Request
   for Information document to potential business partners in the
   telecommunications sector and received five responses to evaluate. 

   Based on the quality of the proponents' submissions generally, staff are
   recommending that the City advance directly to the negotiation stage of
   the process with Rogers communications and, should that fail, a
   subsequent negotiation with BC Telephone, instead of the more
   traditional RFP (request for proposal) method. This would involve
   prototyping the business relationship jointly with the School Board that
   likely will exist in the form of a partnership agreement should the
   prototype prove successful.

   The recommendations of this report support taking the next step in that
   direction. 


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