Award of Proposal No. PS00028-Lease of Duct Space

ADMINISTRATIVE REPORT

Date: August 28, 2000
Author/Local: T. Kyle/6011

RTS No. 01668

CC File No. 1805

Council: September 12, 2000

TO:

Vancouver City Council

FROM:

General Manager of Engineering Services

SUBJECT:

Award of Proposal No. PS00028 - Lease of Duct Space to Novus Telecom Group Inc. For Telecommunications Purposes

RECOMMENDATION

THAT the General Manager of Engineering Services and Director of Legal Services be authorized to conclude negotiations, and execute and deliver, a lease with Novus Telecom Group Inc. or an affiliate of that entity, for leasing one 5650 metre three inch City owned duct loop, installed above the Dedicated Fire Protection System, for the installation of fibre optic cables for telecommunications purposes, 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. No legal obligations will be created or will arise until execution of the Agreement

CITY MANAGER'S COMMENTS

The City Manager RECOMMENDS approval of the foregoing.

COUNCIL POLICY

Execution of legal agreements by the Director of Legal Services and General Manager of Engineering Services 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 lease with Novus Telecom Group Inc. or an affiliate of that entity (“Novus”) to allow them to use a City owned duct to install fibre optic cable in the City of Vancouver (the “City”).
BACKGROUND
In 1998 and 1999, the City installed portions of the Dedicated Fire Protection System (“DFPS”) in the downtown core of Vancouver. During the installation of the DFPS, the City also installed three 3-inch PVC ducts above the DFPS mains.

These ducts were installed for future City needs. The City was approached by a number of carriers regarding possible use of these ducts. Depending on the financial return, staff considered that it might be worthwhile to lease one or two of the ducts in the interim and for its own needs, the City would use alternative duct space in the future if necessary.

Accordingly, a Request for Proposals was issued that identified a business opportunity to lease these ducts, or portions of them. The City’s intent was to maximize the use of the ducts, provide an opportunity for improved communication service to the downtown core and generate revenues from this asset until it is required for the City’s own use. In order to provide the maximum public benefit and opportunity, it was indicated that it was not the intent to lease both ducts to a single proponent.
DISCUSSION
Proposals for the lease of duct space were opened on August 16, 2000 and referred to the General Manager of Engineering Services for report. There were three proponents that submitted Proposals. A fourth Proposal was received proposing consulting services to the City, but was eliminated because it did not address the lease of the duct. Novus submitted the proposal most beneficial to the City and is therefore being recommended. A partial summarized tabulation is as follows (a full table is provided as Attachment A):

Novus Telcom Inc.

Metromedia Fibre Network Services

WFI Urbanlink Ltd.

Annual Financial Benefit

$20.00 per metre
($113,000 per year)

$7.00 per metre
($39,550 per year)

$5.23 per metre
($29,550 per year)
OR
$250,000 one time payment and $2.74 per metre
($15,481 per year)

Provision of Dark Fibre

6 or 12 fibres at no cost to the City

12 fibres in City’s duct, City to pay labour and maintenance
6 fibres in a shared cable, City to pay splicing etc.

12 fibres at $1 per metre per year

Given the value of the bids received, it is proposed to award a lease for the use of only one of these ducts. The value of the next highest bid is not considered sufficient to allow the City to apply these revenues to developing alternate duct space for its own use should this be required during the term of the lease.
To allow Novus to use the duct space for the installation and operation of a fibre optic network in the City of Vancouver, it is proposed to enter into a twenty year lease with this company.
The CRTC has been asked to make a ruling on the terms and conditions dealing with telecommunications in City streets. This proposed lease of space in an existing City owned duct is not expected to be affected by the outcome of the Vancouver’s application to the CRTC, that is currently underway.
The proposed terms and conditions in the lease with Novus would be as follows:

· Term to be 20 years
· Novus to pay for the installation of access vaults to be owned by the City
· City to approve the locations and number of access vaults
· City to receive up to 12 dark fibres for its own communications needs
· Novus may sell or lease any unused fibre or sub-lease any unused space within the duct to other

interested parties

· Novus to pay the City for up-front costs associated with permit application reviews, inspection

of construction, traffic signing costs, lost parking meter revenues and street pavement repairs.

· Novus to provide as-built information relating to their facilities
· Novus to indemnify the City to the satisfaction of the Director of Legal Services
· Novus to pay for relocation costs of fibre where requested by the City

Novus Telecom Group Inc. was founded in 1996 to provide integrated telecommunications services to multiple dwelling units. The company has two wholly-owned subsidiaries, Novus Telecom Inc. which is a registered Competitive Local Exchange Carrier with the CRTC and has a Municipal Access Agreement with the City and Novus Entertainment (B.C.) Inc. which holds a broadcast distribution undertaking licence from the CRTC to provide cable television services to the Greater Vancouver area. Novus has deployed over 6 kilometres of 432 strand fibre optic cable in Vancouver to date andwill have completed deployment of an additional 7 kilometres by the end of August. Novus has a customer base of over 3,000 cable television and Internet users and in July Novus Entertainment received approval to expand its cable television service area to the Greater Vancouver area.

CONCLUSION
Staff recommend that Council allow Novus to lease a 3-inch duct loop located above the DFPS system. It will be used for the installation of fibre optic networks in the City by Novus subject to the execution of a lease to the satisfaction of the General Manager of Engineering Services and the Director of Legal Services.

NOTE FROM CLERK: APPENDIX A NOT AVAILABLE IN ELECTRONIC FORM -ON FILE IN THE OFFICE OF THE CITY CLERK.

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TO:	Vancouver City Council
FROM:	General Manager of Engineering Services
SUBJECT:	Award of Proposal No. PS00028 - Lease of Duct Space to Novus Telecom Group Inc. For Telecommunications Purposes

	Novus Telcom Inc.	Metromedia Fibre Network Services	WFI Urbanlink Ltd.
Annual Financial Benefit	$20.00 per metre ($113,000 per year)	$7.00 per metre ($39,550 per year)	$5.23 per metre ($29,550 per year) OR $250,000 one time payment and $2.74 per metre ($15,481 per year)
Provision of Dark Fibre	6 or 12 fibres at no cost to the City	12 fibres in City’s duct, City to pay labour and maintenance 6 fibres in a shared cable, City to pay splicing etc.	12 fibres at $1 per metre per year