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Distance Education... Distance Education... Distance Education...

The ADEC Digital Satellite Network: A Proposal


Revised: October 06, 1998


The Proposal

  • The ADEC Distance Education Consortium, including its state and land grant university members and affiliates, propose to purchase and manage a 36 megahertz digital satellite transponder on a 5-year lease.

This purchase is essential to realizing the ADEC vision and program goals, including the capacity to provide high quality and economical distance education programs and services via the latest and most appropriate technologies. The ADEC Board has declared this as a major ramp-up of the organization.

ADEC is rapidly becoming an international distance education organization and its core mission programs are required in rural and remote areas, as well as urban and suburban learning centers. Core mission programs include, but are not limited to:

  • Food and Agriculture
  • Environment and Natural Resources
  • Community and Economic Development
  • Children, Youth and Families
  • Nutrition and Health
  • Distance Education and Technology

02


The Rationale

  • Focus on Content/Program Areas in Depth
  • Program Aggregation and Packaging
  • Ability to Control Marketing

A recent model published by the Harvard Business School titled "Winners and Losers: Industry Structure In the Converging World of Telecommunications" strongly suggests that the keys to success in the new 21st century telecommunications environment will be:

  • Focus on Content/Program Areas in Depth
  • Program Aggregation and Packaging
  • Ability to Control Marketing

In addition, ADEC must control its transmission costs and reach into parts of rural America that will never be economically reached by phone lines, cable TV or methods other than wireless.

Just as MTV is more valuable than any individual program provider to MTV - the sum of the ADEC parts/aggregated content is far more valuable than fragmented individual member offerings.

03


If ADEC has its own transponder it CAN:

  • Aggregate content
  • Package programs
  • Control transmission $
  • Market widely
  • Reach rural America

Why does ADEC need its own transponder? So it can:

  • Aggregate content
  • Package programs
  • Control transmission costs
  • Market its programs more widely...and
  • Reach rural America with its programming

04


Increasing leverage, bargaining power & interoperability

  • Owning a transponder gives us leverage & bargaining power to help:
    • Deal with incompatible state-designed transmission systems
    • Reduce waste of transmission $s and shift $s to program production

Additional rationale for an ADEC-owned transponder comes from the need to be in a better position to use leverage and bargaining power in pursuit of consortium wide interoperability. Currently vendors use a divide and conquer strategy, selling multiple formats and standards to public institutions, none of which are compatible with each other. The current situation is one of state designed and owned fiber, microwave and other telecommunications systems, unable to communicate from state to state, resulting in reduced program delivery to customers and a tremendous waste of resources. Consortia members are unable to easily exchange content/programs and they have no bargaining power in the marketplace. If wasted transmission expenditures can be reduced, dollars can be shifted to support needed additional program production.

05


First Mover Advantage

  • First movers will win audience and position

The Harvard model also strongly endorses the proposition that the "first movers" are going to win audience and position in the emerging digital environment. ADEC has the opportunity to be a major "first mover" on the digital satellite scene with a full range of program and services from public higher education.

On the financial side, pricing is currently attractive for the purchase of an entire transponder. However, the window of opportunity is only expected to stay open for another 8 to 12 months (Mitch Robinson, Intelligent Devices Incorporated).

06


What if we don't decide now?

  • Not making a decision is a decision!

If ADEC waits...and doesn't make a decision now...we’ve really made a decision...albeit a wrong one!

07


The Real Question is:
Will the Land Grant Institutions lead into the 21st Century?

Considerable marketing hype, smoke and mirrors surround distance education and learning via technology. The U.S. public now erroneously believes that a college degree is 3 to 4 times more expensive than it really is. Public higher education has taken a beating in the last two years.

It’s time for the ADEC institutions to take a leadership position by working "together" through the consortium. This action will demonstrate that the 21st Century Land Grant institutions are just as ready to take the university to the people using new technology as were our 19th century counterparts using face-to-face methods. But the Land Grant institutions will not be able to lead without an adequate telecommunications infrastructure, control of our own content-packaged, marketed and delivered at a cost we control.

08


So how will it work?

This diagram is a simple representation of the elements of the proposed ADEC Network. A more detailed diagram & technical explanation is attached.

Very simply, we’re proposing to deliver both video and data to the campus, to Learning Centers, to the workplace and to the home.

09


How will the transponder be used?

  • 5 video channels for ADEC programming
  • 5 video channels for sale to member institutions
  • 2 Internet channels providing 5000 points of presence

So how will the ADEC transponder be used?

  1. First, there will be 5 video channels for ADEC programming (Calculated at 5 days/wk x 12 hrs/day x 4 wk/mo. x 11 mo.x 5 channels)

  2. Next, we’ll have 5 video channels for sale to member institutions who need additional channels. (7 day/24 hr.use)

  3. Finally, we’ll have 2 channels devoted to wireless transmission of Internet data, providing 5000 points of presence.

10


What will the ADEC network offer?

  • Substantially reduced cost for satellite time
  • Consistent location for satellite programming
  • Access to homes for your distance education offerings via DBS
  • Wireless connectivity for rural sites
  • High-speed wireless Internet access

Reduced cost for satellite time: Current digital time on spot market costs $200-$400; Current analog time is $600-800. We expect to offer pricing BELOW $135/hr. for members.

- One satellite for all of the programming offered by the consortium...eliminating the need of your remote sites to be constantly retuning their receive dishes.

- One channel providing programming directly into homes via a connection with a commercial DBS provider, such as Echostar, Primestar, etc.

- Wireless Internet access at speeds ranging from 110 - 250 Kps

11


State/Institutional Examples for Local Equipment

  • Low End Case
  • 1.8 meter (6 ft.) receive dish = $400
  • Digicypher II 4200IRD(receiver) = $850
  • CORRidiOR Internet interface = $850
    • (or DSR 5200 - includes 2 & 3 above = $1,700)
  • Cable/misc. = $100
  • Ku Band LNB = $120

Total = $2,320 per site

This is a low end example, assuming that a site has no equipment now. It also assumes that the satellite receive dish remains pointed at the ADEC transponder (so it’s not a steerable dish) and that you’d be using a telephone or other terrestrial return method.

12


Upgrading existing analog installation

  1. Not Needed
  2. Digicypher II 4200IRD(receiver) = $850
  3. CORRidiOR Internet interface = $850
    • (or DSR 5200 - includes 2 & 3 above = $1,700)
  4. A/B switch & cabling = $50
  5. Not Needed

    Total for upgrade = $1,750

If you have an existing analog satellite receive set-up, upgrading that site to add digital capability is less expensive than our first case.

You won’t need Items 1 and 5...so you’ll still have the cost of Items 2 & 3 and a reduced cost for the items in #4.

This configuration allows the reception of both analog and digital satellite signals other than just the ADEC digital transponder. However, when the steerable dish is pointed to an analog location or a digital transponder other than the ADEC satellite, the simultaneous Internet from satellite is lost. But you’d still have your low speed Internet connection from your local Internet Service Provider.

13


Add Satellite Internet Return

  • $1,000 - $3,000 per site via two-way VSAT technology

If you want to add a satellite Internet return capability, from your site BACK TO the Internet, an option can be added using a technology called VSAT or Very Small Aperture Terminal.

We hope to negotiate for a volume buy of this equipment, which should drive the price toward the $1,000 per site cost.

This option may be very desirable where land line charges are expensive. This means you would not need an Internet Service Provider.

14


The Business Plan: An Overview

  • What is an owner member?
  • What is an non-owner member?
  • Costs
  • Revenues
  • Cost/revenue comparison

Now let’s look at the proposed business plan for making this all happen...

Starting with a definition of the various categories of investors in the network...

Then moving to an analysis of the costs, revenues and a comparison of the two...

15


What is an owner/member?

  • An institution (or combination of institutions) that invests $50,000/yr. for 5 years.

We’re proposing that an "owner/member" would be an institution (or some combination of institutions) that would invest $50,000/yr. for the 5-yr. life of this contract.

Our analysis of the consortium membership leads us to believe that 30 is a reasonable number of owner/members for us to expect to buy in at this level.

16


This is what an owner/member gets

  • 440 hours of digital satellite time at no extra cost
  • 166 individual connect points for high-speed, wireless Internet at no extra charge
  • Ability to buy extra time at "favored" rate
  • Ability to buy extra 7 x 24 channels at $250,000/channel
  • Owner rights detailed in letter of commitment

440 hours of digital satellite time at no extra cost

166 individual connection locations for high-speed, wireless Internet at no extra charge

Ability to buy extra time at "favored" rate

Ability to buy extra 7 x 24 channels at $250,000/channel(at cost)

Owner rights detailed in letter of commitment subject to approval by Executive Committee of the Board.

17


What is a non-owner/member?

  • An institution paying dues at the current rate

Based on our research, we are using a conservative estimate that we will see 25 institutions in this category within five years.

18


A non-owner/member gets:

  • Digital satellite time at preferred rate
  • Access to all ADEC information and Intranet
  • Access to ADEC Grants
  • Representation within ADEC governance structure
  • Opportunity to become owner at later date ... subject to availability and Board approval

Digital satellite time at preferred rate

Access to all ADEC information and Intranet

Access to ADEC Grants

Representation within ADEC governance structure

(Owners also receive these items)

Opportunity to become owner at later date ... subject to availability and Board approval

19


Costs

  • The proposal is for 2.9 million dollars
  • The major components are:
    • Transponder purchase & teleport installation/operation
    • Internet connection to supercomputer at NCAR (Boulder)
    • ADEC existing operations costs & "new" costs

The total projected costs are 2.9 million dollars.

This breaks down into three major components:

  • First, the costs to buy a full satellite transponder and associated construction costs for a teleport enabling us to send signals to that satellite.

  • Next, the cost of the connection to the super-computer at the National Center for Atmospheric Research (NCAR) in Boulder.

  • Finally, the existing ADEC operating costs plus some new costs associated with the management and marketing of the transponder

20


Transponder purchase

  • One 36-megahertz transponder, digital KU-band, on a 5-year contract = $2 million per year

As I mentioned earlier, we’re proposing to buy one entire 36 megahertz digital transponder, using the Ku-band.

We are negotiating for a five year contract, at a per year cost of 2 million dollars.

21


ADEC Teleport at CSU

All ADEC programming would be sent via satellite or videotape to the proposed teleport at Boulder.

There, the ADEC consortia member & customer programming would be aggregated and segmented, according to ADEC instructions. Then the teleport would uplink the various channels of programming and data to the ADEC owned transponder.

The costs attached to establishing and maintaining this capability at CSU are as follows:

22


Operational Costs for Teleport

Personnel = $259,500/yr.
Expendables = $40,000/yr.
  
Total expenses = $299,500/yr

The operational costs for the Teleport at Colorado State University are as follows:

Personnel = $259,500/yr.
Expendables = $40,000/yr.

Total expenses = $299,500/yr

(a more detailed breakdown of the costs is included in the appendix)

*by policy, ADEC currently pays only direct costs

23


One-Time Capital Construction Costs

  • Costs for physical construction and of securing dish, associated wiring and connectivity to control equipment=$81,500

Costs for physical construction of securing dish, associated wiring and connectivity to control equipment are a one time expenditure that would cost approximately $81,500.

We will pay for this by a combination of CSU, ADEC, federal grant and foundation monies.

24


ADEC "New" Costs

  • Program manager and transponder marketing/management=$130,000

With the new transponder will also come some additional costs to the consortium for a person to deal with the acquisition, organization and scheduling of programming for the ADEC combined channel and the one providing programming to the DBS provider...as well as someone to sell the additional transponder time and channels and manage the allocation of this capacity.

25


ADEC Current Operations Costs

  • President, office staff, supplies, operations, program grants & infrastructure development = $375,000

Current operations costs are for the ADEC President, office staff, supplies, operations, program grants and infrastructure development.

These total approximately $375,000.

26


Annual Costs

Digital transponder = $2 million
Internet access/line charges = $120,000
Teleport operations = $299,500
"New" costs = $130,000
Current ADEC costs = $375,000
  
Total costs = $2,924,500

Our best estimate for costs are as follows:

Digital transponder = $2 million
Internet access/line charges = $120,000
Teleport operations = $299,500
"New" costs = $130,000
Current ADEC costs = $375,000

Total costs = $2,924,500

27


Annual Revenue

30 owner/members @ 50,000 = $1.5 mil.
25 non-owner/members@$8,250 = $206,250
Sale of 5 video channels@$250,000/channel = $1.25 mil.
   
Total revenue = $2.956 million

30 owner/members@50,000 = $1.5 mil.
25 non-owner/members@$8,250 = $206,250
Sale of 5 video channels@$250,000/channel = $1.25 mil.

Total revenue = $2.956 million

28


Possible Additional Revenue

Sale of 200 hrs. of occasional use satellite time at $135/hr. = $27000
Sale of 300 hrs. of occasional use satellite time to non-members @$200/hr. = $600,000
Sale of 600 Internet connections at $200/yr to non-owners = $120,000
   
Total = $990,000

Sale of 200 hrs. of occasional use satellite time at $135hr. = $270,000

Sale of 300 hrs. of occasional use satellite time to non-members @ $200/hr.= $600,000

Sale of 600 Internet connections at $200/yr to non-owners = $120,000

Total = $990,000

29


Cost / Revenue Comparison

  • Revenue = $2.956 million
  • Costs = $2.925 million

A comparison of our yearly costs and revenues shows us at a "break even" scenario with the figures we’ve used...but this is assuming a less than full use of our transponder space.

There are other potential revenue sources that need to be considered...but we must do this in the context of some criteria for appropriate operation of our transponder in light of our status as a non-profit organization.

30


Other potential "partners"

  • Army Reserve
  • Foundations

We have talked with the Army Reserve on several occasions...and they are interested in making use of our transponder on the weekends for training via satellite. This fits in well with our member needs, since most of that need occurs Monday through Friday. The Army Reserve is VERY serious about partnering with us...and may even come to the table as an "owner," with a $50,000 "deposit" for us to hold a slot for them for future weekend use.

In addition, foundations such as Kellogg and Rockefeller have indicated an interest in partnering with us in some fashion to make use of our transponder, teleport and nationwide network of downlinks for distribution of some of their programming.

31


The Timetable

  1. Discuss Business Plan at Dean and Directors’ Meetings
    • June-August, 1998
  2. Call for Letters of Commitment
    • October 01, 1998
  3. Review of Letters of Commitment
    • October-December, 1998
  4. Invoices Sent
    • March 15, 1999
  5. Invoice Payments Due
    • July 01, 1999
  6. Hiring of 2 New FTEs
    • July 01-December 31, 1999
  7. Network Roll-Out
    • July 01-December 31, 1999

32


Proposed Operating Guidelines

  • ADEC member needs come first
  • Additional capacity brokered to organizations that provide a good operational fit or affinity with ADEC core mission
  • Uncommitted revenues will be used for program development and production grants and other expenses as approved by the Board

Our overall guideline is that ADEC member needs come first

Once these are met, additional transponder or teleport capacity will be brokered to organizations that provide a good operational fit or affinity with the ADEC core mission

Uncommitted revenues will be used for program development and production grants and other expenses as approved by the Board

33


Results of No Decision

  • Limits our ability to take part in:
    • Allocation of digital spectrum
    • 4-7% Educational allocation on DBS
    • Public interest/education-commercial broadcast digital TV
    • Internet II
    • Rural Access
    • Increased program distribution

And what happens if we don’t make a decision...well, I referred to this a bit earlier, in that by not making a decision, we’ve really made one.

And we would limit our ability to take part in the allocation of parts of the digital spectrum for educational use; the potential allocation of 4 to 7 percent of the DBS spectrum for education; a possible public interest/education/commercial broadcast digital partnership; Internet 2 initiatives; we’d lose perhaps the only real method to meet the connectivity needs of rural America, and we’d put a serious roadblock in front of our plans for increased distribution of ADEC programming.

34


Appendix A:

Cost Breakdown for Teleport Operation & Management

Sr. Management @ 0.5.FTE = $47,200
Engineering @ 1.5 FTE = $79,080
Technical & Support @1.5 FTE = $118,000
Clerical @ 0.5 FTE = $15,150
Total personnel = $259,430
Parts, depreciation, etc. = $40,000
Total yearly direct expenses = $299,430

35


Appendix B:

One-Time Capital Costs

Uplink Dish (4.6 meter) = $50,000
Installation
   Anchor pad/fencing = $17,000
   Relocation of exiting dish = $1,500
   Electrical = $8,000
Contingency = $5,000
Total = $81,500

36
 

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