Briefing on New Franchise Ordinances for Telecommunications & Video Services Applicant: Verizon

Telecommunications Infrastructure Facts  Telecommunications is critical infrastructure  Telecommunications enables telecommuting, medical monitoring, new retail models, entertainment, industry and things we’ve not thought of yet  Enables global competitiveness  Just like transportation, it’s all about avoiding congestion – fiber is needed  Fiber carries the “triple play” – voice, video and data; telephone vs. cable company distinctions blurring  Competition and choice for citizens  Unlike other critical infrastructure, cities rely completely on the private sector for “road” improvements

Why Two Franchises?  A Telecommunications Franchise because Verizon is an Incumbent Local Exchange Carrier (ILEC) which carries specific legal obligations to Competitive Local Exchange Carriers (CLECs)  A Cable Franchise because must play by same rules for carrying cable television services

About Verizon  A Dow 30 industrials company  2006 revenues over $88 billion  2007 revenues of $93.5 billion  Formed in 2000 as a result of merger between Bell Atlantic and GTE (also includes NYNEX)  1983 Baby Bell -- roots going back to C&P  Over 140,000,000 land lines  250,000 employees  2 nd largest telecom in country (was #1 prior to AT&T merger with Bell South)  Fiber build-out a key strategy to compete in 21 st century

Telecommunications Franchise  Expired in 1998 putting in place an implied legal regulatory framework  Verizon intends to build a fiber-to-the-home network consisting of all digital fiber optic network  Limited regulatory authority  Management of the public right-of-way  Does not manage the provision of telecommunications services  Term is 15 years  Contains insurance, bonding and indemnification  Construction, relocation and restoration standards

PROW Fee  Verizon will pay a PROW (Public Right-of- Way) use fee in accordance with (G)  Not less than $.50 per access line  The annual rate of the Public Rights-of-Way Use Fee shall be calculated by multiplying the number of public highway miles in the Commonwealth by a highway mileage rate (as defined in subsection E of this section), and by adding the number of feet of new installations in the Commonwealth (multiplied by $1 per foot), and dividing this sum by the total number of access lines in the Commonwealth. The monthly rate shall be this annual rate divided by 12.  Last year ~ $244,000

Cable Franchise  Applied in Feb  Negotiated franchise is a condition precedent to a company electing to obtain an “ordinance cable franchise”  Allows a company to begin offering service before a franchise is negotiated  15 year term  Insurance, indemnification, etc.  Customer service standards

About Verizon’s Network  Completely digital service provided through new Verizon owned fiber-optic network known as FIOS  One of three communications providers in Hampton offering the “triple play” (voice, video and data) – Cox and Cavalier other two  Verizon is subject to obtaining permits and to comply with the construction standards of the City as they currently exist or are changed in the future

Service Area  All occupied dwellings in initial service area in 3 years  65% of total service area in 7 years  80% in 10 years (requires additional ordinance)  Requirement that service be extended to any household where there are 25 or more units per mile

NASA Channel  No  Verizon will carry the Military channel  By law we can not require a provider to provide a channel  To date we have not been afforded access to top-level decision makers on this issue

Schedule for Ordinances  State law allows them to begin offering service in July  One Public Hearing on July 16 with 1 st reading and approval  Final readings/approvals on August 20

Agreement Includes  Applicant will provide 3 initial and up to 4 additional PEG channels and pay a fee to support them (initially $4,000 and then up to 1.5% of gross revenues starting in 2009)  Channel assignments will not be 46, 47 and 48 (likely that we will receive other regional PEG channels in addition to Hampton’s)  Service provided free of charge to public facilities (with some limitations)  Franchise fee equal to 5% of gross revenues  Typical customer service requirements (i.e., staffing an office with a convenient location, call center standards, reasonable appointment scheduling, etc.)

Other Considerations  Cox’s franchise is up for renewal in 2010  City’s basic right to regulate no longer in place after entry of Cavalier based on “competition” provisions in state law  Current number of subscribers estimated to be ~ 35,000 households  The law continues to evolve; unclear how long Verizon and Cox will be playing under different rules

Questions