October 2010 Ballot Measure

Gustavus voters are being asked the following question in the October, 2010 municipal election:

Shall the City of Gustavus withdraw up to $150,000 from the Gustavus Endowment Fund, use it to finance the construction of a community-wide wireless broadband network by the Gustavus Community Network (GCN), and, over the course of up to eight (8) years, re-deposit the loaned funds to the Gustavus Endowment Fund from GCN subscriber fees, together with five percent (5%) interest per year?

See the Official Election Pamphlet for a description of the measure and statements in favor and opposition. The rest of this page provides additional background information to help voters make an informed decision on this question.

Questions and Answers

Q: What will it take for the ballot measure to pass?

A: A 2/3 vote in favor is required to appropriate principal from the Gustavus Endowment Fund per Municipal Code 04.13.100. A simple majority (51%-66%) of yes votes is not enough to pass the measure.

Q: What will happen if ballot measure 1 passes?

A: If the ballot measure passes, the city will hire an outside consultant to develop a request for proposals whereby the city asks vendors to submit plans and bids for building a community-wide broadband network. Once completed, the community-wide broadband network would be owned and operated by the City of Gustavus as it is now. Proceeds from operations would be used to repay the loan from the endowment fund, with interest.

Q: What will happen if ballot measure 1 fails?

A: If the ballot measure fails, the city will not expand GCN broadband to cover the entire community. Nathan Borson withdraws his volunteer labor for GCN maintenance and operations on July 1, 2011. If current trends continue, GCN will have insufficient revenue to professionalize maintenance and operations so will be unable to continue operating much beyond that time. One option for continuing Internet service is to solicit proposals for a private company to take over ownership and operation of the Gustavus Community Network, possibly on condition that the new owner provide broadband coverage to the entire community.

Q: How will the city build the community-wide broadband network and repay the endowment funds?

A: Please see "The Plan," below.

Q: Will GCN provide broadband service to my business or residence if the ballot measure passes?

A: Yes. GCN will solicit proposals for a community-wide broadband network to serve the entire area from Rink Creek to Bartlett Cove. In August, 2009 GCN developed a network design and business plan to accomplish that goal (see "The Plan," below). Vendors may submit their own proposals and network designs but they must meet the goal of serving the entire community to be selected.

Q: If the ballot measure passes, what will be the cost to connect to the GCN broadband network?

A: Nothing. The plan is for the endowment fund loan to pay the full cost of the broadband network, including all equipment and installation at each customer location for the first 150 subscribers. However, if the cost of construction is higher than expected, customers might have to pay an installation charge to get connected.

Q: How will I connect my home or business to the new community-wide broadband network?

A: The exact requirements for connecting to the new network will depend on the final design, but it will probably be mostly or entirely wireless. Some customers may be able to connect using their Wi-Fi equipped computers and portable electronics without any new equipment installed at their premises. Many customers will likely need special radios installed in or on their buildings. It may be necessary to install a pole mount on the outside of the building and run low-voltage communications cable (CAT-5) from there to a power source inside the building.

Q: Can I unplug the GCN wireless router when I am not using it?

A: GCN requests that you leave your wireless equipment on all the time unless the GCN administrator has told you otherwise. Other wireless mesh customers may be connecting to the Internet through your GCN router and they may be disconnected if you turn off your equipment. Only the cooperation of all GCN customers makes it possible to have affordable broadband service despite our low population density and remote location. Thank you for being the community in community network!

Q: What does it cost to leave my wireless equipment running all the time?

A: The radios most likely to be used for the new community-wide network are extremely energy-efficient, using two watts or less as actually measured by our watt-meter. One watt continuously used translates to 0.72 KWh/month. At September, 2010 Gustavus electric rates of $0.39 for business and $0.26 for residences subsidized by Alaska's Power Cost Equalization program, the GCN wireless equipment adds at most $0.56 or $0.52, respectively, to your monthly electric bill.

A: The community broadband business plan (see below) is based on current GCN pricing, which includes a range of service plans at different speeds and prices, from $25/month for year-round “lifeline” service (with speeds comparable to current ACS or AT&T wireless Internet service) to $400/month or more for flat-rate high-speed plans for customers like the Gustavus Public Library.

GCN's basic broadband service costs $53/month (seasonal) or $44/month (year-round) for 1 Gigabyte (GB) of data. Additional usage is $10/GB. Prices are set by the GCN committee. If revenues do not meet the projections in the business plan it might be necessary to raise prices. Or prices could go lower if revenues exceed forecasts.

See GCN pricing for details.

Q: How fast will GCN broadband be? How will the performance compare with other available options?

A: GCN speeds depend on the plan chosen; see GCN pricing for the actual speeds. Generally, the new GCN community-wide broadband network will provide the fastest, cheapest, and most reliable Internet access in Gustavus.

• GCN’s lifeline service offers performance comparable to the 1xRTT cellular wireless Internet service offered in Gustavus by AT&T and ACS.
• GCN’s basic broadband service offers download speeds similar to the lowest-cost offerings from satellite Internet providers HughesNet and StarBand. However, GCN’s upload speeds are ten times faster than satellite and the delay known as latency is one tenth that of satellite Internet providers, so the user experience is far faster web browsing. Interactive applications sensitive to delay such as gaming, virtual private networks, voice, and thin clients perform far better on GCN than on satellite connections.
• Broadband plus and flat-rate plans at various speeds are also available.
  

Q: When will I be able to sign up for broadband service at my location (assuming the measure passes)?

A: It will take some time to solicit proposals from vendors, to award contracts, and for the vendors to build the network. The earliest that customers could be connected to the new network is probably June, 2011. The latest that the new network should be finished is probably June, 2012.

Q: Will GCN still provide local dial-up Internet access?

A: No. Dial-up service will be discontinued when the new network is completed, saving GCN and its subscribers about $5,000 in telephone charges per year. Dial-up subscribers, along with all other GCN customers, will get free equipment and installation to connect to the new community-wide broadband network. The "lifeline" plan will still be available for the same price dial-up customers pay now. On the wireless network the lifeline plan is about twice as fast as dial-up service.

Q: What if no vendor submits a proposal to build the community-wide broadband network? What if all the proposals cost more than the $150,000 authorized by the ballot measure?

A: If there are no proposals that fit within the $150,000 budget, the effect would be much the same as if the voters voted down the ballot measure; the money would stay in the Endowment Fund, the project would not be built, and either there would have to be another round of fundraising, or of soliciting proposals, or an alternate plan would need to be developed such as privatizing GCN.

Q: What is the Gustavus Endowment Fund, and is it appropriate to use it for building a community-wide broadband network?

A: In 2003 the National Park Service paid over $900,000 to the Gustavus Community Association to compensate the community of Gustavus for the economic impact of phasing out commercial fisheries in Glacier Bay National Park. This was in addition to payments to directly affected fishermen, processors, and crew. The federal government placed no conditions or restrictions on use of the funds. When the City of Gustavus incorporated in 2004 it inherited the money from the Gustavus Community Association and adopted ordinance 04.13 establishing the Gustavus Endowment Fund, with its purpose being “to preserve in trust, City assets for the benefit of present and future generations of Gustavus residents.” The ordinance and related policy and procedure state that earnings from the fund "may be appropriated to provide funding for capital outlays, grant matching funds and community projects." Principal from the fund may be appropriated "only upon approval by a 2/3 majority of votes cast in a regular ballot election." Because the amount to be used for the broadband project exceeds the fund’s earnings, it will require such a vote. Whether it is appropriate to lend fund principal to the project is ultimately a question for the voters to decide.

Q: What are the risks to the endowment fund should the ballot measure pass?

A: The loan from the endowment fund for the broadband project is unsecured so it is possible that it might not be repaid, resulting in less money for other community projects in the long term. Possible causes of delinquency include technical problems (network not performing as expected), market risk (unexpected competition or fewer subscribers than expected), and various human failures (mismanagement, departure of key personnel).

Q: A joint venture called Rivada-Sea Lion has submitted a $60 million round 2 broadband stimulus grant application for a wireless network that would serve Gustavus among other areas of Southeast Alaska (see page 24 of the BIP application directory). If that grant is awarded, how will it affect the GCN plan?

A: We expect to know whether the Rivada-Sea Lion grant is awarded well before borrowing endowment funds and launching the GCN broadband project. If the Southeast Alaska Rivada-Sea Lion project is funded, GCN will work with the grant recipient to avoid duplication of effort. We do not yet know whether GCN would continue to exist or would be replaced by the Rivada network, but either way GCN would simply not borrow the money from the endowment fund. Passing the ballot measure preserves the local option in case Rivada is not awarded the grant, but does not require using endowment funds should the Rivada project move forward.

Q: I understand SpaceNet has received a federal grant to provide service to all of Alaska. What does this mean to me and to the Gustavus community-wide broadband project?

A: SpaceNet owns StarBand and this program basically covers the equipment and installation of StarBand dishes for people in unserved areas of Alaska, including Gustavus as far as I know. The upload speeds may also be somewhat higher than the dial-up rates experienced by current StarBand customers, though in our experience advertised speeds of "up to 256 Kbps" for the most expensive plan available from StarBand seldom reach 100 Kbps. This "StarBand for everyone" program is great news for remote communities where individual satellite dishes are the best available option -- installation of those dishes is now free. But it is bad news for Gustavus, where GCN already provides service that is faster and often cheaper than satellite service in the limited areas we cover with our existing wireless network. What we really want is to reach the entire community with GCN service, not continue the proliferation of inferior satellite Internet service, which does not meet any current definition of broadband, and is plagued by slow upload speeds, high latency, and poor reliability.

Q: What if I have other questions about the ballot measure or the broadband project?

The Plan

GCN developed a detailed network design and business plan with financial projections for an August, 2009 broadband stimulus grant application. That grant application was denied but the plan developed for it serves as the basis for the endowment fund loan amount requested, as well as predicting repayment of the loan. It will be up to vendors to submit their own plans and bids and there is no expectation or guarantee that they will be the same as what GCN developed for the grant application.

General Information

The full plan is contained in the 2009 Grant Application itself. The document is 103 pages long, not including the March, 2008 Borealis Broadband Proposal from which much of the design is derived. To help navigate this document, here are some of the most pertinent pages from the application:

Note that the financial statements in the application assume there will be a grant with no loan repayment. The projections have since been revised to include repayment at 5% as envisioned in the ballot question; see "Financial Projections," below.

Network Design

GCN's submission specifies a hybrid wireless network composed of

• A 900 MHz wirelss backbone fed from a new communications tower at the 600-foot elevation in the Falls Creek hydroelectric project area;
• "Backbone" clients attached to the 900 MHz backbone and in turn feeding 2.4 GHz neighborhood Wi-Fi mesh networks;
• Upstream low-latency, high-speed Internet service from AT&T Alascom; and
  
• Existing bandwidth management, hotspot, accounting, billing, and payment processing systems

The technology strategy and network diagrams are further detailed starting on pages 20 and 46, respectively, of the 2009 Grant Application.

Financial Projections

Assumptions

The following assumptions were used to develop the business plan and financial projections for a community-wide broadband network:

• Construction of a community-wide broadband network will cost $150,000 or less, not including the communications tower being built from separate GCN and city reserves. The cost estimate in the grant application is $111,515 excluding the communications facility, existing GCN equipment, and in-kind donations.
  
• GCN prices will remain the same as they are now.
• GCN maintenance and operations will be professionalized (currently they are provided on an "if-and-when I feel like it" volunteer basis).
  
• The number of GCN subscribers will rise from 79 (September, 2010) to 154 within 3 years of project completion. GCN had 154 subscribers in August, 2005, almost all of them dial-up users. The loss of almost half of GCN's subscribers is due to a combination of factors including other newly-available alternatives such as AT&T and ACS wireless Internet service, a November, 2006 technical problem with the ACS phone lines that made dial-up almost unusable in much of Gustavus, and the growing inadequacy of dial-up as Internet content becomes increasingly media-rich. The assumption is that all customers GCN lost will eventually return when it becomes apparent that GCN's community-wide broadband network provides the fastest, cheapest, and most reliable Internet access.
• See Financial Assumptions for details.

Findings

These conclusions and findings follow from the assumptions above:

• GCN would be able to repay a $150,000 loan with 5% interest in 8 years. The interest expense is shown on the Income Statement. The principal payments are shown on the Statement of Cash Flows.
• Operations would also provide sufficient revenue to
• • Professionalize maintenance and operations as shown on the Income Statement,
  • Upgrade the upstream Internet access to keep pace with higher demand as described in the Financial Assumptions, and
    
  • Invest $3,000 to $5,000 per year in improvements to the network as shown on the Statement of Cash Flows and on the Balance Sheet.