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Kansas Senate Utilities Committee Presentation

January 24th 2011

The Chanute, Kansas Network A Community Collaboration

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Chanute Community Broadband Network

• Introduction • Information/Materials to be covered– City History and People– Utility Infrastructure/Experience– Critical Infrastructure– Background on Network– Network Maps– Partners & Customers

• Desired Outcome

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Background• About J.D. Lester

– City Manger • Arrived the Fall 2008

– Business Degree • Marketing

– Transition from Private to Public Sector:• When downsized from Corporate America

– Marketing Director for Municipal Electric in my hometown • Crawfordsville, Indiana CEL&P• Built a FTTH network in 2005

– MPUA – Missouri Public Utility Alliance• KMU, KMEA, KPP combined • Members Services

– Municipal Finance Program, Municipal Broadband, Training Services

– City Administrator for Hermann, Missouri• MPUA member

– Kansas Governor Broadband Task for Member• Asked to represent local governments

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Background• City of Chanute, Kansas –

– Southeast, Kansas - Population approximately 9,000– Octave Chanute

• Rail Road Engineer – KC Bridge over the Missouri River• 4 Communities came together• Wright Brothers flyer patterned after Octave’s design

• A Full Service Community with a “Tradition of Innovation”– Electric, Natural Gas, Water, Wastewater, & Refuse & Broadband

Infrastructure– Operated the Natural Gas & Electric Utility for over 100 Years.

• Natural Gas– Top 10 Largest Nat Gas Providers in Kansas

• Largest municipal gas utility by consumption in state• Almost 1 BCF annually

– Rates, Convenience, Local Control, Citizens have direct input– Muni Gas Purchasing Program = $1,047,569.60 in 2010

• Passed directly to our consumers

– Retained Earnings from this utility was leveraged to begin the electric utility

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Rate Perspective on Natural Gas

EIA Data on Residential Rates (Chanute 2010 rates will be lower than 2009)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 $2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

CHANUTE CITY OFKANSAS GAS SVS COState AverageNational Average

Comparing Chanute, State Avg., & National Avg.

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Background– Electric

• Generation Capacity - 83 MW (3 largest Muni in KS)– Natural Gas Turbine– Duel Fuel Recip. Engines (Diesel & Nat Gas)– Base load contract with KCP&L– Peak 60MW

» Excess Generation

• Distribution– Distribution Miles - 150– 17 miles of 69 KV – 3 mile radius service territory

• Sizable Industrial Electric Load – Ash Grove Cement– Nat Gas Turbine was a cooperative project in conjunction with

their major expansion 8 years ago.

• Efficiency Kansas Program• Take Charge Challenge Competition Participant for 2010 • Working on a possible renewable generation projects• Rates, Convenience, Local Control, Citizens have direct

input

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Rate Perspective on ElectricEIA Data on Residential Rates (Chanute 2010 rates will be lower than

2009)

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.50

4.50

5.50

6.50

7.50

8.50

9.50

10.50

11.50

12.50

7.116.68

6.88 6.78 6.87 6.79

7.48

5.025.22

6.18 6.30

7.187.38 7.45

11.54

7.917.89 7.92 7.86 7.71 7.65 7.64 7.65

6.24 6.31 6.35 6.37 6.556.89 6.88

7.737.98

6.91 6.89 6.86 6.85 6.74 6.64 6.817.29 7.20

7.44 7.61

8.14

8.909.14

9.79

11.51

8.47 8.558.26 8.25 8.26 8.39

8.70

7.807.50

8.08 8.038.45

9.199.42

11.66

10.63

Chanute

State Average

National Average

SEK Regional Avg for Muni's

Comparing Chanute, State Avg., Regional Avg., & National Avg.

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Why The Network

• This is about Economic Development– No longer the industrial age; we are in

the Information Age • Ultra High Speed Internet is critical to

business• It is the potential great equalizer for

Rural Communities• No desire to provide Cable TV or

Phone service

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What is the Definition Of High Speed

• Can twisted pair or coax provide enough speed for the future need?

• Remember your first PC?– Backbone traffic grew 53 percent from

mid-2007 to mid-2008, down from a growth rate of 61 percent in the previous 12 months

– Study: Bandwidth jumps on college campuses Higher education has seen general increases in internet speed and availability--but larger schools still hold a significant advantage .

• Is bar is too low?

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The RealityUS Drops to 19th in Broadband Penetration Worldwide - US Broadband Penetration Jumps to 91.5% among Active Internet Users - September 2008 Bandwidth Report

*See Attachment A (2010 State New Economy Indexand B to see where Kansas ranks compared to other states)

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The Reality of the Technology1. Recreation and Entertainment

– Not just surfing faster & watching more TV

2. Education and Training3. Health Care4. Personal Safety5. Accessibility for People with Disabilities6. Access to Information7. Environment8. Energy9. Transportation10.Public Safety11.Government12.Economic Development

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Sought Public/Private Partnerships

• Chanute attempted to partner with incumbent providers.– We offered to build it for them to provide

services over• With 30 year financial recovery by Chanute• Received design comments from one of the

incumbents about our network design so it would be integrated into their system.

• Have provided wholesale bandwidth to local providers to offer retail internet services

• We have a desire to have an open access network

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Today’s Network• Wireless

– Deploying a WiMAX System currently – G4 technology– Using the Educational EBS band– Can reach the entire county

• Fiber– 1 GB capable

• ATM Frame Relay – 23 communities in South Central and Southeast Kansas

• Level 3 – Directly Tier 1 provider– POP just outside of Chanute– Currently 100 MB speed – Capable of going to 1 GB with a phone call

• Future: VoIP Phone – Internal Voice Network – Saving over $50,000 a year in phone

line charges– Savings comes from using existing broadband network

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Community Broadband Network

• City first deployed fiber in 1984 – Electric operations & communications for system– Three decades of running a reliable network using these

technologies.• Network was extended to anchor institutions

– Schools - USD 413 and NCCC– Library– Hospital (Neosho Memorial Regional Medical Center)– City Facilities (Utilities, Police, Fire)– Neosho County (Facilities- including 911/Dispatch Center)

– Wireless Free access in parks & downtown area• Working together we eliminated duplication of

systems and reduced tax dollars being spent to fit the needs

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Community Broadband Network

• ICAN Partnership– USD 413, Neosho Community College, & City– We share:

• Bandwidth – Connection to the internet backbone• Servers• Physical Location Space• Technical Support• Software

– Laserfiche - Electronic Document Storage System– E-Mail MS Exchange– Several Others

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Education• Chanute is the KAN-ED Connection

– Chanute's network meets the requirements to be an authorized Kan-ed Access Provider (KAP) interconnected to the state's education network to deliver educational programming and content to Kan-ed eligible network participants.

– One connection into our network– We transport IP packets to the schools

• Education’s requirement for bandwidth is exploding– NCCC with on-line classes, more video teaching– Distance Learning– Recently increase then capacity from 20 MB to 50 MB– Their demand required we increase our transport

capacity this year from 45 MB to 100– Burst to over 300 MB

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Business Customers• Chanute has not proactively recruited

additional customers– They call us and want service

• More than T1 requirement

– Kustom Signals• The first "commercial" participant on the City's fiber network was

Kustom Signals at their specific request to the City Commission. This request was made after an extended outage experienced by Kustom Signals' then current incumbent, private sector Internet Service Provider.

• They run their entire business via the Internet– Shipping, Receiving, Ordering, Purchasing, Etc.– $1 Million dollars/day

• They called Chanute when they were WITHOUT service for 5 days

– Ash Grove Cement• Allowed the City to install wireless radio for non for profit use on their

tower. (Government, Education, Safety & Health)• Video Conference Meetings

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Business Customers• Community National Bank

– ATM Frame Relay– Connect all locations (23)– Carry all their data– Virtual Transportation

• Video Conferencing Board Meeting• Saves Time & Fuel Expenses of Travel

• Chanute Manufacturing– Massive engineering drawings need to be share d across their multiple

locations in other states– Relocated their servers to Chanute from main office in Tulsa, OK because of

the speed and reliability

• Tri-Valley – Sheltered workshop for local disabled in Chanute & Ft. Scott

• Fire Escape Coffee House– Internet Radio Services

• KINZ Radio• Business Incubator –

– Provide free access while entrepreneurs are starting and growing their businesses for future relocation into the Chanute Community• Chanute Channel 5 – Video production company• StephiMac Designs – Internet marketing of jewelry assembled in building

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Things to Come• Smart Metering

– Reduce peaking/power costs to consumers• AMR

– Automated Meter Reading• VoIP

– Internal Voice Communications• Google???

– Have completed the application– 85% of the hits to the www.chanoogle.net web site are from their

worldwide corp. offices including China– Significant community support for the Google efforts AND the

deployment of a fiber network regardless• Fiber for All #1 • Local Control & Home Rule

• Open Access Network available for providers to compete on for our customers with their services???

• Economic Development– Just completed a strategic plan– Marketplace demand for capacity is high and a rural community having

an ultra high speed network will draw business to our community

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Summary/Questions• Public vs. Private

– We desire partnerships– Have 3 local providers talking to us about offering

services currently• City Role

– We don’t want to provide voice or video services. We want to deliver IP Packets similar to the way we deliver kilowatts.

– Pro competition, pro business, pro growth• Spending Tax Payers Dollars?

– No “taxpayers” dollars have spent building this network• We have actually lowered the property tax mil levy in

Chanute the last 3 years

• Money stays in the community– It is continually reinvested in Chanute

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Summary/Questions• Chanute is a home rule charter city, and we want

to control our own local destiny, not expect others to it for us.– Cities all across the U.S have successfully built out IP

networks • This infrastructure is as important to RURAL

COMMUNITIES as electrification was in the 1930’s– Big Cities vs. Small Towns – Return on investment?– Need fewer barriers not more– FCC - Recommendation 8.19 of the FCC’s National

Broadband Plan states as follows: “Congress should make clear that Tribal, state, regional, and local governments can build broadband networks.”

• Technology is a major key to growth– (See Attachment C e-Strategy Report North Carolina)

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Summary/Questions

• THANK YOU• Come and take a tour

• http://www.chanoogle.net/• http://www.youtube.com/watch?v=QHIVTLOuGTI• http://www.youtube.com/watch?v=jD6XCBZh9PE• http://www.youtube.com/watch?v=bty06UH3nP4• http://www.chanute.org/Misc/fiber/fiber_web.wmv

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END

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It Is A World Economy• Recommendation 8.19 of the FCC’s National Broadband Plan states as follows:

“Congress should make clear that Tribal, state, regional, and local governments can build broadband networks.”

• • Kansas ranked 9th in the US in speed for 2010, but the US ranked 25th in the world.

I’d bet that Kansas’s relatively high rank among US states is driven largely by the KC metro area and that most of the rest of the state is in pretty bad shape.

• • http://cwa.3cdn.net/5c4f38468211cab6bb_lrm6bjx13.pdf • • Kansas ranks 26 in the State New Economy Index for 2010. There are lots of

interesting points that you can make by drilling into the details of the index, as applied to Kansas.

• • http://www.itif.org/publications/2010-state-new-economy-index • • A great new study is SNG’s report for the e-NC Authority of North Carolina, which

shows that a huge percentage of new small businesses are driven by broadband. • • http://e-nc.org/documents/0000/0395/SNG_-_NC_e-Strategy_Report_-_Final.pdf

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The Background pg 11. The City first deployed fiber in 1984 to support critical electric operations in its municipal

electric utility, so it has a long history of highly reliable use of this technology.

2. Chanute's fiber communications network was initially extended to serve the local anchor institutions' requirements that were not being met by the incumbent providers deployments or in an economically feasible manner. Chanute was years ahead of the current federal broadband deployment initiative's to support the needs of Community Anchor Institutions. The anchor institutions connected to the City's network include the local school district facilities, public library, the local community college, the regional medical center, the City's utilities, police and fire departments. The county sheriff's department and regional e911 dispatch center are also connected to the network via broadband wireless equipment and data circuits leased from AT&T.

3. The first "commercial" participant on the City's fiber network was Kustom Signals at their specific request to the City Commission. This request was made after an extended outage experienced by Kustom Signals' then current incumbent, private sector Internet Service Provider. Other commercial entities within the community have subsequently sought interconnection to the City's network.

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The Background pg 2

4. Chanute's network meets the requirements to be an authorized Kan-ed Access Provider (KAP) interconnected to the state's education network to deliver educational programming and content to Kan-ed eligible network participants.

5. Chanute's network provides an alternative broadband service choice for those entities that choose to become network participants.

6. Revenues generated by the network remain in the local community, supporting the local economy and economic development activities, including technology reimbursements from the federal e-rate program.

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The Background pg 3Chanute attempted to partner with the local incumbent providers to deliver ultra-high speed

broadband services into the community. Neither entity was willing to work with Chanute to provide the desired services, and to date, neither entity has offered comparable products with economically feasible pricing for Chanute's network participants. At one point, Chanute offered to build the network infrastructure required to deliver the desired network services to standards that would meet or exceed AT&T's network specifications, if AT&T would deliver content over the network. Chanute asked for enough recurring revenue from the network to recover its fiber deployment over a 30 year capital recovery period.

Chanute received network design comments and support from AT&T personnel as it expanded its initial infrastructure and has purchased a substantial amount of network electronic equipment directly through AT&T.

Chanute has provided network access to other, local competing Internet Service Providers, so that they can deliver low cost broadband services within the community.

Chanute has submitted proposals to the State to provide local network connectivity to the several state offices in Chanute (a) to allow bandwidth aggregation at significantly lower costs than was reportedly paid the current provider to save the state money and (b) create a local network connection for emergency use in a local or regional disaster response. The state has not been willing to work with Chanute to pursue the potential benefits of a local network connection that would allow creation of a secure interface among the KHP, the other state agencies located in Chanute, Neosho County Sheriff, and the Chanute police and fire departments.

We can try to flesh out other bullet points for your discussions with the legislative committee.

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THINGS TO YET TOUCH ON• RURAL, RURAL, RURAL – THE great equalizer for small Kansas • AT&T – Updating the outdated broadband laws, deregulation, cable is standing aside of

this legislation• Describe Chanute Utility• Pro business (Ash Grove, Kustom Signal, Community Bank), Pro competition market place,

Where the money came from, Community Desire, Business Owners, costs, money stays in the community, continually reinvested, attraction in the information age, local control, market place and competition, local destiny, existing system, service to anchor services, explain VoIP savings, lowering mille levy, network history 1983, Kan Ed network, e-rate USF, data transfer. INTERNET PACKETS, streamline costs and big city vs small city investment similar to rural electrification decades ago. Smart Metering, load control, AMR,

• Many build outs were supported by federal grant dollars to subsidize and create incentive for

• Current network• No desire to provide TV services or Dial Tone, OR even being the retail Internet Service

Provider – We currently have three local provider talking to use about this. We provide the road and they provide the services. Ultimate competition

• WiMAX license and deploying a 4G technology system. The main function is for Automated Meter Reading for all utilities AND future deployment of SMART metering. It can also be used for public safety (City & Neosho County), NCCC, USD 413, USD 101, & Maybe Altoona Midway. Our

• Dual Honed• Have our own IP addresses – flexibility