ADMINISTRATIVE REPORT

                                            Date: February 27, 1997
                                          CC File No. 5806-1       
    TO:       Vancouver City Council

    FROM:     General Managers of Corporate and Engineering

    SUBJECT:  Broadband RFI  -  Selection of a Business Partner


         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

         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.

                               -   2   -


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


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

    Council is the approving body for contract awards of over

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


    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.


    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;

                               -   3   -

         -    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

    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.

                               -   4   -

    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.


    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.  

                               -   5   -

    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
    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.       

                               -   6   -


    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

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

         -    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

    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.

                               -   7   -

    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

              -    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

              -    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,

    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

                               -   8   -

    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. 


    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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