Proposal for Legal Services Prepared for

Introduction.

Over the past decade the internet and electronic connectivity has changed our daily lives. These changes impact how we communicate, how and where we work, how business is transacted, how we deliver city services, how we are educated, and how we enjoy our free time. Just as cities played a crucial role in the development of railroads, highways, sewer and water and other crucial infrastructure, cities that prosper today will likely be those that embrace and invest in communications infrastructure. The benefits for cities which invest in technology are far reaching.

Cities that are in the forefront in the provision of broadband capacity will help to provide an infrastructure to attract and retain business, provide educational opportunities and retain an increasingly mobile workforce dependent on broadband communications. Cities with broadband capacity will also be able to deliver public services at substantially lower rates. Finally, and perhaps most importantly, it is crucial that cities provide broadband infrastructure for the benefit of its residents as society becomes more and more dependent on broadband connectivity.

The telecommunications industry and cable television industry have together invested billions of dollars to improve their infrastructure to provide broadband capacity. Telephone companies began offering residential digital subscriber line (“DSL”) service in the late 1990s about the same time many large cable operators began providing cable modem services. Each industry has focused on investing capital in larger, more densely populated markets often to the detriment of rural communities. The question is whether the existing broadband capacity in your community is sufficient to meet the needs of residents and small businesses and whether the private sector is ready to step up and invest in the necessary infrastructure to meet these needs.

As we begin 2007, the marketplace for broadband services is largely dominated by the local phone company and the local cable operator vying for customers in each market. The DSL and cable modem products which these companies sell require a hardwire connection to each household or business. However, there is limited availability of wireless broadband service in most markets across the country particularly smaller rural areas. In fact, the National Telecommunications & Information Administration (“NIA”) estimates that as many as 25,000,000 U.S. homes and small businesses do not have any access to broadband internet options.

Over the past five years elected officials have begun to take notice of the profound impact that broadband capacity has on the local economy. Many officials have introduced proposals to spur broadband deployment and promote competition in the delivery of broadband services. Elected officials have also come to realize that waiting on the private sector to invest capital necessary to provide broadband to more sparsely populated areas may result in lost business opportunities for a region and an overall negative impact on the local economy. Municipalities are therefore eyeing municipal wireless broadband applications as a way to provide capacity to their residents and businesses and to provide additional competition to wire-line providers whose rates may now exceed the budgets of many low and middle income residents. In Minnesota, the communities of Chaska, Buffalo, Minneapolis, St. Louis Park, Richfield, Moorhead and St. Paul have either deployed wireless broadband networks or are in the planning phase.

This paper will review the considerations which municipalities must weigh in determining whether to pursue a municipal wireless broadband system as well as some of the issues to consider when structuring a Wi-Fi Agreement.

Definitions.

Below is a summary of key terms necessary to understand the technologies and standards referenced when discussing municipal wireless broadband services.

1. 3G also known as “advanced wireless services” is an FCC license radio band spectrum for the wireless transmission of internet service. 3G services typically use a license cellular network architecture that has been upgraded to carry data and voice.

a. Several wireless companies including Cingular, Sprint, and Verizon now offer mobile wireless broadband service over their cellular networks making it available to approximately 96% of the US population via traditional cellular telephone service.

b. Typical data speeds in major metropolitan areas are between 220 to 700 Kbps in more rural areas speeds are approximately 40 - 135 Kbps.

2. Backhaul means the infrastructure necessary to transmit traffic from a node, or other remote site, back to a central site where a switch may be located.

3. Broadband means a general set of transmission capabilities and characteristics, such as always on, high speed internet access with sufficiently robust functionality suitable for evolving, bandwidth-hungry applications.[1]

a. Broadband generally includes data transmission speeds that exceed 200 or 300 Kbps, or more, in one or both directions.

4. Mesh Network is a networking technique that allows data to be routed between various nodes. Mesh networks are considered self healing and can operate even when a given node fails. There is sufficient redundancy in a mesh network so that data is transmitted to other nearby nodes to ensure reliability.

5. Switch is a device that filters and forwards packets of information between local area network segments.

6. Wi-Fi means wireless fidelity. Wi-Fi is a registered trademark term promoted by the Wi-Fi Alliance, a group of wireless internet hardware and software providers that certify “802.11” products for network interoperability. A 802.11 network refers to a family of specifications approved by the Institute of Electrical and Electronics Engineers (“IEEE”) in 1997 for a wireless, over-the-air interface Local Area Network (“WLAN”).

a. Computer users can generally access the internet with a high-speed wireless connection if they are within 300 feet of a transmitting antenna and have appropriate receiving hardware installed in their computer.

b. Wi-Fi provides data transmission at speeds of up to 11 to 54 Mbps.

7. Wi-Max means worldwide interoperability for microwave access. Wi-Max is a registered trademark term promoted by the Wi-Max Forum, a group of wireless internet hardware and software providers that certify “802.16” for network interoperability.

a. Wi-Max is capable of transmitting network signals covering in excess of 30 miles of linear service area.

b. Wi-Max could provide multiple shared data rates of up to 75 Mbps.

c. Wi-Max is often considered valuable for backhaul purposes or for last mile applications for existing wire infrastructure.

What is wireless broadband internet?

One of first questions which city attorneys generally ask is: how is wireless broadband internet regulated under state and federal law? The short answer is that because wireless technologies use unlicensed radio band spectrum they are subject only to the FCC’s rules to prevent interference with FCC licensed services. The question of whether wireless broadband is subject to additional regulation remains unanswered.

The FCC Wireless Broadband Access Task Force considered this same question and recommended that the FCC classify wireless broadband as an “information service.”[2] However, the Task Force also noted that because of the services offered over wireless broadband, certain regulatory requirements will likely need to be imposed by the FCC under Title II of the Communications Act with respect to common carrier requirements for “telecommunications services.”[3] Under either regulatory approach, municipal regulation similar to cable franchising is not generally available for a private wireless broadband system.

Public v. Private Ownership

There are approximately four different models to consider regarding the provision of municipal wireless broadband services. Many of these models can be blended together and/or modified to fit the goals of the community and the business model desired.

1. Non-profit. Under this model a major business in a community, charitable organization or local institution takes a leadership role to form a non-profit entity to fund, deploy and maintain a wireless broadband network. The non-profit works with the municipality to obtain access to public rights-of-way including street lights, traffic lights, municipal buildings, water towers and other city owned infrastructure. A municipality’s involvement in this type of system is generally limited to its provision of city owned assets with no financial commitment or ongoing management responsibilities.

2. Private Contract. Under this model a municipality generally goes out to bid making available its city assets for the installation of wireless antennas and rights-of-way for backhaul services. For municipalities with significant available assets there is greater opportunity for negotiations with the service provider to secure discount rates for low income residents and/or to negotiate favorable rates for municipal services on the network. Under this model a municipality does not build, maintain or own the network but may maintain a certain level of control over the network depending upon the agreement negotiated for the use of city assets and/or for securing “anchor tenant” bulk services on the network.

3. Public/Private Partnership. In a public/private partnership model, there is a great deal of creativity in how a municipality chooses to structure the arrangement. A municipality may provide access to city assets and anchor tenant obligations and may or may not participate in the design, construction and ownership of the system. In some models a municipality may finance the construction of the network and then make the capacity available on a wholesale basis to other providers. In other scenarios the municipality may enter into an agreement with a private entity to manage and operate the network while the city handles marketing, sales and other functions through a municipally owned utility.

Depending on the way in which this model is structured, bidding requirements may be triggered under state law. Funding of the system is also a critical element under this model to the extent municipal ownership is a part of the partnership arrangement. Funding alternatives may include tax revenues, bond financing, grant funding, private capital, as well as operational funding from service access, fees for various applications and advertising revenue.

4. Municipal Ownership Model. The classic municipal ownership model in the United States occurred right here in Minnesota in 2004 when Chaska constructed a municipally owned wireless broadband network. In Chaska the city was able to construct a network covering 95% of its 22,000 residents with approximately 250 toaster size antennas mounted to city light poles covering an area of 16 square miles. Broadband service was initially offered for about $17 per month.

A municipal ownership model is attractive not only in metropolitan areas but in smaller rural communities where wire-line broadband services may not be available to residents and businesses. In many rural communities an analysis is undertaken to weigh the costs of constructing a wire-line network against the cost of a municipal wireless broadband network. A pure municipally owned network can present significantly more legal and technical challenges and is likely to be met with greater opposition from private competitors.

In Minnesota, Minn. Stat. § 237.19 must also be considered as municipalities are required to obtain a 65% super-majority vote in order to provide telecommunications services.

Pros and Cons of Municipal Wireless Broadband.

1. Pros

a. Incumbent telephone and cable operators provide limited broadband services in the community at high rates and a municipal system would improve availability and increase competition.

b. Municipalities can leverage such networks to obtain lower cost communications services by serving as an “anchor tenant.”

c. Wireless networks are more cost effective than installing wire-line systems.

d. Installing a wireless system will spur economic development and/or help retain local business and telecommuters.

e. Political accountability will minimize the risk of wasteful decisions in constructing the network.

2. Cons

a. A government run system will not perform at the level of private enterprise.

b. Once built a municipality may have an incentive to prohibit others from entering the rights of way to maintain a competitive advantage.

c. Wireless broadband is not a “natural monopoly” similar to water and electric service and there already exists competition in the broadband marketplace.

d. Municipalities are inefficient in adopting new technologies demanded in the marketplace.

e. Taxpayers will be forced to finance the system and will shoulder the burden if the network fails to meet estimates.

Bidding Requirements.

There are a number of draft Requests for Proposals (“RFP”) available on the internet for review. The main problem which municipalities face in creating an RFP is utilizing a model RFP created for Philadelphia or Minneapolis and trying to modify it for use in a much smaller community. Larger municipalities with a higher level of municipally owned assets and anchor tenant service opportunities will be able to demand far more concessions from companies interested in providing services. A common mistake made by smaller communities is to present an overreaching RFP which presents unrealistic mandates given the size of the jurisdiction.

The first step in determining the proper type of RFP to utilize is to determine the ownership model desired by elected officials. Thereafter a survey of available city assets and infrastructure, as well as services which may be migrated over to the wireless system, must be conducted. Issues regarding available electric capacity on city light poles, aesthetic considerations and availability of backhaul capacity should all be assessed prior to issuing an RFP. Once this information is tabulated the municipality is then in a position to determine what leverage it may have in attempting to obtain concessions from interested bidders through the RFP process. However, mandating concessions in an RFP similar to those found in RFPs issued in the top 20 U.S. markets will likely result in an inefficient process and wasted effort on the part of the city and the prospective bidders. For a copy of the Minneapolis RFP visit: http://www.ci.minneapolis.mn.us/procurement/docs/wireless-rfp.doc

Drafting a Wi-Fi Agreement.

One problem facing municipal attorneys when attempting to draft a municipal wireless broadband agreement is there is no “form document” from which to start the process. Copies of agreements can be obtained from Philadelphia, Minneapolis, Portland, Oregon, and other cities around the country although each of these models is drastically different and varies depending upon the negotiating leverage available to the city. Recently Moss & Barnett assisted the City of Minneapolis in drafting its agreement with US Internet. During this process Moss & Barnett was asked to create an agreement which would:

1. Comply with the city’s standard terms and provisions for technology agreements;

2. Incorporate agreed upon SLAs - Service Level Agreement;

3. Include fiber construction requirements to complete required backhaul needs;

4. Incorporate standard pole attachment safe guards;

5. Provide for 10 year fixed pricing for residential services;

6. Mandate a return of the network’s profits for various “community benefits”;

7. Provide for a long-term bulk agreement for the migration of various city telecommunication services as part of the city’s agreement to be an “anchor tenant”;

8. Mandate network neutrality;

9. Require the provider to make capacity available on a wholesale basis;

10. Include open access obligations;

11. Clearly provide financial protections for the city in the form of letters of credit, bonds and other financial guaranties; and

12. Provide for quick and straightforward enforcement provisions and termination rights.

What started as a 12 page contract quickly ballooned to 84 pages - most of which was drafted paragraph by paragraph based on the negotiations between Minneapolis and US Internet on each of the above-referenced issues. The “City of Minneapolis Term Sheet” represents the key deal points negotiated with US Internet and which were ultimately incorporated into the master agreement. The city’s Term Sheet can be found at http://www.ci.minneapolis.mn.us/council/2006-meetings/20060901/Docs/WirelessBroadbandTermSheet.pdf.

In general, the Minneapolis Wireless Broadband IP Data Access Network Agreement includes the following sections:

· Scope of Work

· Project Schedule

· Payments/Pricing Schedule of Fees

· Service Level Agreement

· Fiber Optic Construction Agreement

Highlights of the Minneapolis agreement include:

1. A 10-year fixed rate of $19.95 for 1-3 megabit residential service.

2. USI will provide $500,000 to create a Digital Inclusion Fund (“DIF”) that will be used to promote affordable Internet access, low-cost hardware, local content and training.

3. USI will direct a minimum of 5% of the network’s net profits to the DIF for ongoing digital inclusion efforts. In total, an estimated $11 million will be provided to the DIF over the 10 year term of the contract.

4. Free service will be available in specified public locations, such as parks and plazas in Minneapolis.

5. A free “walled garden” level of service will be available to people throughout the City for neighborhood, government and community services information.

6. Designated community technology centers will receive free wireless access.

7. Minimum service levels must be maintained on the network or USI will be subject to enforcement penalties from the City.

8. Mandatory wholesale requirements and pricing to encourage open access to the network.

9. Completion of the Minneapolis network is expected by the end of 2007.

*****

Brian T. Grogan is a shareholder with the Minneapolis law firm of Moss & Barnett practicing in the firm’s communications law and energy practice group. Brian represents local units of government throughout the country on a variety of communications issues including cable and telecommunications franchising, right-of-way management, municipal wireless communications, tower leasing, pole attachment negotiations, public safety communications and litigation. He is a frequent presenter at state and national conferences regarding communications law and he is a member of the American Bar Association (Forum Committee on Communications Law), National Association of Telecommunications Officers and Advisors, International Municipal Lawyers Association (Contracts, Franchises and Technology Section), and is past chair of the Communications Law Section of the Minnesota State Bar Association.

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For additional information regarding municipal communications such as franchise renewals and transfers, 800 MHz rebanding, right-of-way management, public, educational and governmental programming, municipal communications law newsletters and related matters, please visit our web site at: www.municipalcommunicationslaw.com

Brian T. Grogan, Esq.

Moss & Barnett, A Professional Association

4800 Wells Fargo Center, 90 South Seventh Street

Minneapolis, MN 55402-4129

Telephone: (612) 877-5340 Facsimile: (612) 877-5999

Email: groganb@moss-barnett.com

Web site: www.municipalcommunicationslaw.com

Technology	Delivery	Speed	Price Per Mo.	Range	Development	Performance	Deployment
Dial-Up Modem	Dial-up via traditional copper wireline telephone connection	Traditional: up to 56 Kbps[2] Hi-speed: up to 280 Kbps[3]	Traditional: $5+ Hi-speed: $10+[4]	Traditional copper wireline telephone connection	Mature	Connection generally consistent	Available via traditional telephone connections
Digital Subscriber Line	Copper wireline telephone connection capable of supporting digital data	Up to 32 Mbps[5] Providers generally offer service of 1.6 to 6.4 Mbps[6]	$13-40+[7]	DSL-ready copper wireline connection; up to about 3 miles without use of “repeater” to regenerate signal strength[8]	Mature	Connection generally consistent; speed depends on distance from provider[9]	Substantial deployment in major cities; lesser deployment in other areas
Cable Modem	Coaxial wireline cable connection	Up to 30 Mbps[10] Providers generally offer service of 1.8 to 6.7 Mbps[11]	$40+[12]	Cable wireline connection[13]	Mature	Connection generally consistent; speed does not depend on distance from provider[14]	Substantial deployment in major cities; lesser deployment in other areas
Wi-Fi	Unlicensed radio spectrum	802.11a: up to 54 Mbps 802.11b: up to 11 Mbps 802.11g: up to 54 Mbps[15]