Memorandum

City of Lawrence

City Manager’s Office

 

TO:

David L. Corliss, City Manager

 

FROM:

Diane Stoddard, Assistant City Manager

 

CC:

Cynthia Wagner, Assistant City Manager

 

Date:

 

April 28, 2010

RE:

Staff Report Regarding Request from Community Wireless Communication for Comprehensive Agreement with the City of Lawrence

 

Please place the following item on the May 4, 2010 City Commission meeting agenda:

 

Receive staff report regarding request from Community Wireless Communications (CWC) to execute a comprehensive right-of-way agreement with the City to including existing agreements between the City and Lawrence Freenet, and direct staff regarding the key issues with the request, if appropriate. 

 

Background:

On March 10, 2010, the City received a request from Community Wireless Communications (CWC) to aggregate all of Lawrence Freenet’s current agreements, allowing for the installation and operation of wireless communication equipment on water towers, street lights, and certain traffic poles in the community and downtown area.  CWC wishes to have full access to the City’s rights of way and easements.  In exchange for this access, CWC is proposing to provide the city with a payment equal to 5% of its broadband revenue, in addition to the 5% of its video revenue, which it has already committed to the City under a video service provider agreement authorized in 2009. 

 

Lawrence Freenet has provided correspondence to the City indicating its support of CWC’s request.  Mr. Montgomery, with CWC, has indicated that he believes that transferring Freenet’s agreements under one agreement between CWC and the City would simplify the relationship with the City and, by having the agreements under the control of CWC, enable CWC to continue to raise private funds.  CWC has difficulty now demonstrating to private investors that it has license or access agreements to currently-occupied infrastructure because all City agreements are between the City and Lawrence Freenet.  CWC has indicated that it would continue to provide free service to Lawrence Freenet members who qualify. 

 

Subsequent to CWC’s original request, staff has had several discussions with Joshua Montgomery from CWC regarding the request and Mr. Montgomery provided some additional clarifications on his request from an e-mail sent on March 12, 2010 and on March 26, 2010. Some of the important additional information provided by Mr. Montgomery in these e-mails include an estimate that 5% of revenues generated from Freenet services and right-of-way activities for 2010 would likely be between $25,000-$40,000.  Mr. Montgomery provides some further estimates for future years.   

 

The City currently utilizes Freenet wireless service to monitor the City’s water towers for security purposes.  Presently, the City pays $6,000 per year for this service.

 

The City Commission received the CWC request at a City Commission on March 23, 2010 and referred the item to staff for a report. 

 

Summary of Current Agreements:

Lawrence Freenet and CWC have a number of existing agreements with the City of Lawrence.  CWC is requesting that a new, comprehensive agreement be put in place of many of the existing agreements, with the exception the video service provider agreement, which was authorized in 2009.  It is important to point out that Lawrence Freenet is a not-for-profit company and CWC is a for-profit company.  It is staff’s understanding that the relationship between the two companies is that CWC is the service provider for Lawrence Freenet and owns the equipment with which Freenet provides its service.

 

The Freenet agreements acknowledge the not-for-profit nature of the company and require Freenet to provide regular quarterly reports documenting free service and establishes a target of 10% of users to receive free service. Freenet recently provided the City with its 4th Quarter 2009 report. The non-profit status and the provision of free internet service to low income residents has been the basis for the City’s assistance to Freenet, which includes providing free access to certain parts of the City’s infrastructure system and minimal free electricity to support the equipment in the downtown area. 

The agreements with Lawrence Freenet date back to 2005 and include the following general agreements, which are set forth more thoroughly in the attached summary:

r  Freenet:

o   Water Towers- 18th & Kasold, Stratford Tower, 6th & Kasold, Harper

o   City Hall

o   License Agreement for installation on certain traffic control signals throughout the City

o   License Agreement for installation on a designated number of the City’s downtown light poles and traffic signals

o   License Agreement for the use of the right-of-way located at 23rd and Harper

r  CWC:

o   Video service provider agreement

o   (Note:  CWC/Freenet utilizes street lights throughout Lawrence based on an agreement with Westar Energy.)

 

CWC Request:

CWC is requesting that there be a new, twenty (20) year comprehensive agreement with the City to allow for access on the water towers, traffic signals and the street lights in the downtown area- essentially replacing all of the existing agreements with Freenet on this subject.  Additionally, they wish to have access to City rights-of-way and easements (franchise agreement). 

 

Key Issues:

 

Merging of Right of Way (ROW) and property specific (water tower, traffic signals, etc.) agreements

Currently, the City has agreements with entities for the use of the ROW and each specific type of infrastructure on City owned property.  For example, the City may have company x with several individual agreements covering equipment on water tower a, water tower b, and water tower c.  This is the reason, along with the fact that they have been requested at different points in time, that there are currently as many agreements in place with Freenet. CWC is requesting that the City have one master agreement for all infrastructure.

 

Staff believes that the City could draft a ROW access agreement or franchise agreement with CWC, and then could have individual site or license agreements with CWC for access to infrastructure on City owned property not part of the ROW.  Staff would have concerns with having these all in one agreement because site or license agreements for the use of specific property would have the same length of term as a ROW access agreement.  Typically, City site or license agreements are for shorter duration and enable the City to renegotiate access rates, etc. to ensure that they are in line with the market.  Additionally, there are some specific requirements regarding locating on some of the City’s infrastructure.  For example, there may be different load requirements for one water tower versus another tower.  Regarding the ROW agreement, staff would recommend the City’s standard provisions found in other franchise agreements, including a requirement that CWC be part of Kansas One-Call. 

 

Shift of current practice regarding equal treatment of for-profit companies:  Currently, all for-profit companies pay for infrastructure access on City utility infrastructure (water towers, for example) based upon a method that treats all companies equally and is at market rates.  Attached is a summary of the City’s current agreements concerning water towers.  The current exception to the practice of receiving lease revenue for infrastructure access is with Lawrence Freenet, the only non-profit entity with which the City has such agreements.  The past basis for the Freenet exception was that it was non-profit and that free access for Freenet enabled them to provide free internet access to certain low income subscribers, in line with its mission. 

 

CWC’s request is essentially asking the City to have an alternate way to handle future agreements with for-profit companies that would be more conducive to small companies than the current practice of flat fee agreements for access to City infrastructure.  It may be more cost advantageous for small companies to utilize the percent of revenue calculation that CWC suggests since that approach will mean a smaller payment to the City when their revenues are lower and a larger payment only when revenues are higher. However, it should be noted that franchises in Kansas are required to be competitively neutral and may not be unreasonable or discriminatory.

 

Policy issues regarding this approach are 1) equal treatment for all for-profit companies and 2) potentially creating a situation were the City gets less-than-market rate revenue for its infrastructure access. City Commission direction would be needed regarding these policy issues. 

 

Radio Frequencies: 

Originally, CWC requested that it be granted exclusive use of certain frequencies on poles and water towers.  The frequencies requested are within the public domain and cover broad spectrums that, if limited, could effectively inhibit private competition between wireless providers. Subsequent to its original request, CWC has clarified that it would like to have a “first come, first served” policy regarding use of certain frequencies on City infrastructure and would need a notification provision if any other provider plans to use frequencies that would interfere with its frequencies.  Under the first come, first served premise, CWC is suggesting that if it places an antenna up with a given frequency, the City cannot allow another provider to co-locate on the same infrastructure and use that frequency. 

 

The City’s current agreements with Freenet preserve at all times the predominance of any frequencies or space necessary for emergency communications.  Staff recommends that the City not enter into an agreement that would provide exclusive frequency rights on any of the frequencies that CWC has requested. Additionally, staff has a concern about CWC’s first come, first served concept. On its face such a concept perhaps seems fair and appropriate. However, given the City’s unique ownership of water towers or other infrastructure that are oftentimes the highest and most advantageous points for communication equipment, the City could effectively be limiting future competition amongst providers in these open frequencies, if CWC were to place equipment that would consume all or a large amount of the open spectrum.  This is not a concern with the City’s current agreements with other major communications companies, who have paid hundreds of thousands of dollars to the Federal Communication Commission to receive exclusive rights to certain frequencies.

 

In the current Freenet agreements and other similar agreements, the City addresses potential future frequency interference by standard language along the lines that the company

“warrants that its use of the Property will not interfere with any existing radio frequency users on the Property as long as the existing radio frequency users operate and continue to operate within the frequencies existing as of the date of this Agreement and in accordance with all applicable laws and regulations.  If at any time during the term of this Agreement, Lawrence Freenet’s use of the Property interferes with any existing radio frequency user’s operations, and after the City has notified Lawrence Freenet of such interference, Lawrence Freenet shall take all necessary actions to discontinue the interference.”

Staff believes that by including such standard language in other future like agreements with other companies, this language would address CWC’s concerns with future interference.  However, staff would also suggest the addition of language that would prohibit CWC from effectively taking all of the available open and unlicensed spectrum and limiting future wireless competition. In addition to this, staff suggests that the agreement would continue to preserve the priority use of the City’s infrastructure for emergency communications and other governmental purposes now and in the future.

 

Currently and in the past, there have been some interference issues between Freenet/CWC equipment and emergency communications equipment on the Stratford Tower.  There are current discussions regarding these matters, but work is proceeding on their resolution. Mr. Montgomery most recently communicated that he intended the issue to be resolved by May 1. Staff recommends that any agreement with CWC be contingent upon resolution of these issues to the satisfaction of the City and Douglas County Emergency Communications.  

 

Due to the technical issues involved, City and County officials involved with emergency communications will be on hand to provide additional information regarding frequencies or emergency communications. 

 

The City Commission will need to provide direction regarding the radio frequency issue in the CWC request.

 

Recommendation:

Staff recommends that the City Commission receive staff report regarding request from Community Wireless Communications (CWC) and direct staff regarding the key issues with the request, if appropriate.  Once direction is received, staff can begin work on drafting agreements with CWC that meet the City Commission’s direction. The agreement (s) would then come back before the City Commission for authorization at a later date. 

 

In summary, the City Commission should provide direction regarding CWC’s request for a master agreement, the issue about equal treatment of for-profit companies, and the radio frequency exclusivity request.