Golden LEAF Rural Broadband Initiative

Making Connections in North Carolina Broadband Technology Opportunities Program

MAKING CONNECTIONS IN NORTH CAROLINA MCNC and The North Carolina Research and Education Network

Broadband Technology Opportunities Program Two Rounds. One Goal.

Connecting North Carolina’s Future Today

MCNC

P.O. Box 12889 3021 Cornwallis Road Research Triangle Park, N.C. 919.248.1900 919.248.1101 fax www.mcnc.org

What Are People Saying?

“The extension of NCREN will provide scalability of the network to meet the research and education needs of public education through 2025. In addition, acquiring and building out an open interconnect, middle-mile fiber network will serve as a wholesale-priced conduit for private broadband service providers to reach and serve consumers and small businesses in underserved areas of rural North Carolina.”

Excerpt from a letter of support of MCNC’s application for broadband recovery funds signed by all 15 members of North Carolina’s delegation to the United States Congress (13 House /2 Senate).

“We are embarking on a public-private partnership that will literally change the way North Carolina communicates with the rest of the world. From the mountains to the coast, broadband access is a differencemaker for rural North Carolina. This is a great example of how our state is leading America’s recovery.”

North Carolina Governor Bev Perdue “Our reliance on NCREN has continued to grow as economic conditions have restricted travel and challenged our ability to offer a desired breadth and depth of courses to nearly 220,000 students. An ‘owned’ NCREN will enable our institutions to accelerate the pace of innovation and research, educate greater numbers of students, and address the health care, education, and economic needs of North Carolina’s citizens in greater numbers. NCREN truly is a digital pathway through which our public university can reach all citizens of the state.“ Former UNC President Erskine Bowles / now Co-Chairman of the Presidential Deficit Commission 1

What Are People Saying?

“North Carolina has long supported affordable broadband networks to ensure a high quality of life and a globally competitive future for its citizens, businesses, and communities. Securing this funding will enable us to expand our efforts to train workers and ensure they have the skills necessary to compete in today’s job market.”

Mike Murphy, Chairman of the MCNC Board of Directors “These areas of the state are struggling to transition their economies. The Golden LEAF Foundation Board of Directors views this initiative as an opportunity to provide essential infrastructure, take advantage of federal matching dollars, and invest directly in efforts to grow stronger communities. Access to fiber in these areas will help level the playing field by providing global connectivity for business and educational opportunities. Rural North Carolina cannot be left behind.”

Dan Gerlach, President of The Golden LEAF Foundation “Rutherford County has focused on the economic, educational, public safety, and other societal benefits of broadband almost since the start of the Internet era. We believe the network that will result from the Golden LEAF Rural Broadband Initiative is a significant step in making affordable broadband service available to our citizens and businesses. We have already begun to mention the network in economic development discussions. While not the total solution, we believe the GLRBI is a step in helping the county form the private/public partnerships necessary to reach every citizen and business in the county with affordable broadband service.“ John Condrey, Rutherford County Manager 2

Who is MCNC and What is NCREN? Created by the governor and the N.C. General Assembly in 1980, MCNC is an independent, non-profit organization that employs advanced networking technologies and systems to continuously improve learning and collaboration throughout North Carolina’s K-20 education community and allows for the implementation of telehealth and healthcare information exchange technologies in public health and nonprofit hospitals. MCNC accomplishes this mission by operating the North Carolina Research and Education Network (NCREN).

NCREN is a robust, secure, exclusive communications network that connects the institutions of the University of North Carolina System, most North Carolina Independent Colleges and Universities, all North Carolina Community Colleges, all North Carolina K-12 Schools, select public health facilities, and most nonprofit and university hospitals to each other and through advanced research networks such as Internet2 and National Lambda Rail, to the world.

In 2010, MCNC applied for and received two federal Broadband Technology Opportunities Program (BTOP) awards. These awards totaled $104 million, and when combined with $41 million privately-raised matching funds, represent a $145 million investment in broadband infrastructure in rural North Carolina. This report summarizes MCNC’s operation, the plans for the BTOP awards and the impact the awards will have on North Carolina and its citizens.

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What We Do •

MCNC provides statewide and national network leadership.

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MCNC enhances North Carolina’s competitive position.

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MCNC, through NCREN, provides in-state communications and Internet access to all K-20 education institutions and a significant portion of public health/non-profit hospitals.

MCNC enables education and healthcare to leverage network technologies to make operations more efficient.

MCNC levels access to educational content no matter where a student goes to school.

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North Carolina Research and Education Network Community

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MCNC Spend with Service Providers Bandwidth needs in education continue to rise. Over the years, MCNC has been meeting rural institution bandwidth needs through contracts with private-sector service providers. MCNC’s spending with private telephone and cable companies represents 63 percent of the service fees paid to MCNC by K-20 education to operate NCREN.

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7.8 5.7

6.6

5 2008 2009 2010

0 Millions Includes local circuit spending for K-12 School Districts

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What is ARRA/BIP/BTOP and Broadband Recovery?

The American Recovery and Reinvestment Act (ARRA) of 2009 appropriated $7.2 billion to broadband investments. The ARRA directed the U.S. Department of Agriculture’s Rural Utilities Service (RUS) and the U.S. Department of Commerce’s National Telecommunications Information Administration (NTIA) to expand broadband access to unserved and underserved communities across the U.S., increase jobs, spur investments in technology and infrastructure, and provide long-term economic benefits. As a result of this appropriation, RUS further funded the existing Broadband Initiatives Program (BIP) and the NTIA created the Broadband Technology Opportunities Program (BTOP). BIP made loans and grants for last-mile broadband infrastructure projects in rural areas that directly serve consumers, small businesses and provide last-mile service to CAIs. BTOP provided grants to fund comprehensive community infrastructure, public computer centers, and sustainable broadband adoption projects. The BTOP’s Comprehensive Community Infrastructure grants served mainly the middle-mile portion of the network. The middle mile directly serves large CAIs like universities, hospitals, and school districts and also wholesale access for the last mile.

As of September 2010, BTOP ($4.7 billion) and BIP ($2.5 billion) had obligated all their funding. While MCNC’s main focus is education, the $104 million in BTOP Grants and $41 million in private investment will allow MCNC to build an NCREN that through private/public partnerships can serve healthcare, public safety, and other public sector customers. The network also can be utilized by private-sector service providers to supply broadband service to underserved consumers and underserved small businesses. This significantlyexpanded network will help North Carolina realize its vision of high-speed broadband for all citizens.

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The Broadband Needs of North Carolina North Carolina Citizens As the importance of broadband access became more of an economic development and connectivity issue, the Rural Prosperity Task Force was formed in 1999. After its initial report to the N.C. General Assembly, legislators then created the Rural Internet Access Authority (which was renamed e-NC Authority in 2000). The e-NC Authority continues to work with citizens across the state and with private-sector telecommunications and telephone cooperatives to change the access to citizens of broadband from 32 percent to about 80 percent. Today, there are still major areas of the state, particularly rural areas, where citizens do not have access to basic broadband.

North Carolina Community Anchor Institutions Community Anchor Institutions (CAIs) are deďŹ ned as public institutions that provide a service to the public or are facilities where the public gather to be educated, gain information, or receive care. NCREN currently serves the broadband needs of many education and healthcare CAIs in the state. The need for broadband at these institutions grows signiďŹ cantly every year (between 20 and 40 percent). In addition, the applications these institutions operate require a level and type of network connectivity that is not commercially available to optimally perform. Finally, many CAIs in rural and underserved areas of North Carolina, such as libraries, lack the amount of bandwidth they require to serve their constituents.

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BTOP Impacts in North Carolina •

Approximately $144 million of spending with the private sector to build the network.

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Create and/or save thousands of jobs throughout the state.

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Reduce middle-mile, wholesale access prices substantially for last-mile providers.

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Allow operators to deploy last-mile broadband service to underserved areas.

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Serve the bandwidth needs of CAIs statewide at stable costs for generations to come.

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Create infrastructure that meets the advanced needs of research, education, and healthcare.

For more information, visit MCNC’s BTOP Central Web Space online at www.mcnc.org/btop.

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Overall Private-Sector Stimulus for NCREN Expansion Amount in Millions 1 8

136

Private Sector Companies MCNC Project Management In-Kind Donations 10

Facts about BTOP Funding

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1.

The BTOP awards from 2010 represent all capital funds - to be used only to construct the network.

MCNC needs a stable operating funding flow from the NCREN Community of connectors to properly upkeep the community anchor institution portion of the network. It is expected that even as these connectors increase their bandwidth demands on the network over the next two decades, operating funds paid to NCREN will remain relatively flat. The connectors will be getting more and more bandwidth for the same operating investment.

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No state funds were utilized as matching funds for the MCNC awards. The entire cash match for both rounds was privately raised, mainly from the Golden LEAF Foundation ($24 million), MCNC Endowment ($8 million), and other donations. Other states - Illinois, Pennsylvania, and West Virginia - appropriated multi-million dollar matching investments with tax dollars.

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The contribution from the Golden LEAF Foundation was significant in sheer amount but also because it allowed MCNC to meet/exceed the 30 percent required match for Round 2. In Round 1, the required match for federal dollars was 20 percent.

Two Rounds. One Goal.

BROADBAND TECHNOLOGY OPPORTUNITIES PROGRAM Round 1

Round 1

Rural Broadband Initiative

Round 2

Connecting North Carolina’s Future Today 12

MCNC BTOP Awards MCNC received $28.2 million through BTOP’s Round 1 phase in January 2010 to fund the engineering and construction of approximately 400 miles of new fiber to expand the optical footprint of NCREN in southeastern and western North Carolina. MCNC raised $11.7 million in matching funds for its successful application through private sources, including $7.75 million from the MCNC Endowment ($4 million in cash and $3.75 million in equipment purchases), making the total project a $40 million investment in broadband infrastructure. The second round BTOP application is a $106 million project that in August 2010 received $75.75 million through BTOP and a $24 million matching grant from the Golden LEAF Foundation. An additional $6.55 million in match was raised from the MCNC Endowment, donations of land from individual community colleges, universities and others, and a donation of already-installed conduit in northeastern North Carolina from the Albemarle Pamlico Economic Development Corporation. No state tax dollars were used to fund these projects. Because of the Golden LEAF Foundation’s investment—the entire project has been named the Golden LEAF Rural Broadband Initiative (GLRBI).

Both MCNC awards are a part of a coordinated strategy developed by the Office of the Governor, the N.C. Office of Economic Recovery & Investment, and e-NC Authority to improve broadband access for businesses and residents in underserved areas. Once all work is complete, the two rounds of BTOP infrastructure have the potential to serve directly, or through MCNC partnerships with private-sector service providers, more than 1,500 anchor institutions, 180,000 businesses, and reach more than 300,000 underserved families.

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Counties Impacted by GLRBI The GLRBI includes more than 2,000 miles of new fiber throughout 69 counties that will ensure community anchor institutions throughout the state will have access to unlimited amounts of bandwidth now and into the future. Consumers and small businesses along the fiber build also will be reached with enhanced broadband service through wholesale and last-mile commercial telecommunications and cable providers with whom MCNC has and is forming partnerships.

The GLRBI bridges the prosperity gap by delivering critical middle-mile broadband infrastructure and direct connections throughout the state. Sixty-Seven of the 69 counties impacted are either completely or partially underserved, according to the BTOP/BIP definition of underserved.

Breakdown and Impact: • • • • • • • • •

32,597 square miles 5.9 million residents / 2.32 million households 709,500 households without broadband access 160,000 businesses 1,718 K-12 schools 61 community college main and satellite campuses 33 baccalaureate degree granting four-year colleges and universities 254 public libraries 1,887 public safety facilities 14

Miles Covered By Round Total Aggregate 1,645.93 new miles of construction, 2,598.53 miles of new operated infrastructure.

Round 1 The routes as engineered represent 434 miles of new construction and 904 new operated miles.

(Note: the new miles make up part of the total operated miles) Round 2 The proposed routes (and as reported on our baseline) are 1,694.53 new miles operated as part of GLRBI with 1,211.93 representing new construction, 354.3 representing new miles obtained/leased via IRU, and 128.30 miles of existing miles being upgraded.

(Note: These totals are pending formal route design and engineering)

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Counties Impacted by GLRBI The GLRBI includes more than 1,000 miles of new fiber throughout 69 counties that will ensure community anchor institutions throughout the state will have access to unlimited amounts of bandwidth now and into the future. Consumers and small businesses along the fiber build also will be reached with enhanced broadband service through wholesale and last-mile commercial telecommunications and cable providers with whom MCNC has and is forming partnerships.

The GLRBI bridges the prosperity gap by delivering critical middle-mile broadband infrastructure and direct connections throughout the state. Sixty-Seven of the 69 counties impacted are either completely or partially underserved, according to the BTOP/BIP definition of underserved.

Breakdown and Impact: • • • • • • • • •

32,597 square miles 5.9 million residents / 2.32 million households 709,500 households without broadband access 160,000 businesses 1,718 K-12 schools 61 community college main and satellite campuses 33 baccalaureate degree granting four-year colleges and universities 254 public libraries 1,887 public safety facilities 16

Round 1: Job Creation and Stimulus To date, MCNC has awarded contracts for Round 1 to the following firms:

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Fiber Technologies: Construction/installation of fiber in western N.C. Globe Communications: Construction/installation of fiber in southeastern N.C. Comtech: All fiber splicing related to this portion of the project Cisco Systems: Cisco ONS 15454 Optical Design Network Solution CommScope: Fiber-optic cable and materials ONUG Communications: Engineering design, project planning, and related services

Through these contractors and their subs, the Round 1 portion of the project is projected to create and/or save 230 jobs. MCNC will add a few jobs to administer and oversee the build of the fiber, but most will be contracted positions with vendors handling various aspects of the project.

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Round 2: Job Creation and Stimulus To date, MCNC has awarded contracts for Round 2 to the following firms:

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Kimley-Horn & Associates: Engineering design, project planning, and related services

MCNC will issue several Requests for Proposal (RFP) for the design, construction, and operation of the GLRBI network - just as in Round 1 - in 2011. These RFPs have the potential to create and/or save more than 1,000 engineering and construction jobs in the state. MCNC will add a few jobs to administer and oversee the build of the fiber, but most will be contracted positions with vendors handling various aspects of the project. MCNC’s experience with the Round 1 award likely will lead to RFPs being issued in a rapid pace.

Vendors should register at www.mcnc.org/btop regarding these business opportunities.

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At Work: Broadband for N.C. Telehealth Network The partners in the N.C. Telehealth Network (NCTN) are moving forward in assuring non-profit health care providers have the broadband services needed to improve the health and care of North Carolina citizens.

The Cabarrus Health Alliance (CHA), the NCTN project coordinator, signed a contract valued at up to $7.2 million with MCNC and the N.C. Office of Information Technology Services (ITS) as a major sub-contractor in October 2010.

MCNC and ITS will supply reliable high-speed broadband services for the Public Health Phase of the NCTN. This phase supports public health agencies and several of the larger free clinics and community health centers throughout the state. MCNC and ITS will work with private-sector service telecommunications firms including AT&T, TimeWarner Cable and CenturyLink to connect these facilities to NCREN. These two NCTN phases are subsidized by a 2007 pilot program award of $12.1 million from the Federal Communications Commission (FCC) as part the Rural Healthcare Pilot Program. The next phase will focus on improving broadband facilities at low cost for North Carolina hospitals using part of the FCC award. This second phase is expected to be operational in 2011.

The project website is http://nctelehealthnetwork.com.

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North Carolina Has a Plan North Carolina remains proactive to the special and leading-edge needs of education institutions, consumers, and small businesses while adapting to broader demands.

High-speed Internet is no longer a luxury, but a necessity. MCNC’s sustainable and scalable plan for technology-enabled education and broadband connectivity is of the utmost importance for all North Carolinians. What it takes now is creative public-private partnerships – leveraging this new middle-mile to reach those still unserved and underserved.

This new network, called the Golden LEAF Rural Broadband Initiative, will be a great enhancement to the capabilities NCREN. It has the potential to reduce the costs of delivering broadband services to consumers and small businesses in regions of the state where affordable broadband currently isn’t available. MCNC will not compete with private-sector telephone and cable companies to serve these consumers and businesses.

These carriers have built businesses specializing in serving the communications needs of consumers and businesses; just as MCNC has built NCREN to serve the unique, high-bandwidth needs of research, education, public health, and other public institutions.

MCNC will help create public/private partnerships to enable private-sector broadband providers to reach underserved citizens and businesses. This approach benefits every citizen in the state.

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MCNC P.O. Box 12889 3021 Cornwallis Road Research Triangle Park, N.C. www.mcnc.org