A11
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.
- 2 -
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;
- 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
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.
- 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.
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.
- 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
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.
- 6 -
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.
- 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
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.
- 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.
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.
* * * * *