Committee Hearing, March 10, 2006

COUNCIL OF THE CITY OF PHILADELPHIA JOINT COMMITTEES ON TECHNOLOGY & INFORMATION SERVICES AND PUBLIC PROPERTY & PUBLIC WORKS - - - City Hall, Room 400 Philadelphia, Pennsylvania Friday, March 10, 2006 10:40 a.m. - - - PRESENT: COUNCILMAN BRIAN J. O'NEILL, CHAIR COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DICICCO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - BILL 060160 - An ordinance for the purpose of creating a citywide wireless broadband Internet access system, to bridge the digital divide, to increase the efficiency and reduce costs of government and to promote economic development and tourism, et cetera V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2

Let's get started. The quicker we get started, the quicker we will get out of here. It is so nice out. I think that's one of the reasons that we had trouble getting a quorum this morning. I'm Councilman Brian O'Neill here with Councilman Darrell Clarke co-chairing this hearing of the Joint Committees of Technology & Information Services and Public Property & Public Works. We do have a quorum, and I would like to introduce the Council members, many of whom are on both committees, that are here. Councilman Marian Tasco is to my left, Councilwoman Donna Miller to my right, Councilman Clarke and then Councilwoman Blondell Reynolds Brown. Councilman DiCicco is here. We allow any Council members who are not on the committee to participate fully in this. And Councilman Michael Nutter is 3 here as well. As council members arrive, I will try to introduce them at the appropriate time. We would like to get started. The first panel on our witness list, fortunately, is already seated, and I will just let them introduce themselves.

Thank you. Good morning, Councilman O'Neill and Councilman Clarke and the members of the City Council. I'm Dianah Neff, the chief information officer for the City. I'm pleased today to testify on behalf of the City Council Bill 060160 that will provide for the creation of broadband wireless Internet access for the City of Philadelphia. I am accompanied today by Derek Pew, the interim chief executive officer of Wireless Philadelphia, and Don Berryman, the president of EarthLink's municipal wireless division. How do you knit together a 4 rapidly diversifying city? Use invisible thread. The question and answer are from the National Geographic Traveler magazine that was published in the fall of 2005 naming Philadelphia America's next great city. The Wireless Philadelphia initiative is that invisible thread. It will help to unify this diverse city by bringing state-of-the-art communications and high-speed Internet access to all residents and businesses of all income levels and in all neighborhoods. Two years ago at the request of Mayor Street we began the Wireless Philadelphia initiative to invest in the future of our city and its residents. The creation of a citywide wireless broadband infrastructure will enable all of our residents, and especially our children, to take the fullest advantage of the new digital society by making Philadelphia the first major city and one of the largest anywhere to turn itself into a citywide wireless hotspot. 5 I am happy to be here today to report that with the support of City Council we believe this can be accomplished within the next to 6 months. 7 In outlining his vision for 8 this effort, Mayor Street set forth 9 several goals. He instructed the 10 Wireless Philadelphia to provide a 11 solution for affordable broadband 12 wireless access in the entire city, that 13 we should create a program that will help 14 bridge the digital divide. This 15 opportunity must be available to all of 16 our residents regardless of their 17 circumstances. 18 The initiative must support the Mayor's educational strategy. The long-term success of the city depends on harvesting the potential of its citizens, especially our youth. To develop a partnership with the private industry to ensure that this new service is well-managed and does not 6 become obsolete as technology changes and to find a way to build the network without using taxpayer dollars. Why is Wireless Philadelphia important? Providing affordable broadband Internet access citywide is about more than technology. It's about access and opportunity for all and about the future of Philadelphia and its citizens. Let me briefly describe the reasons why the administration decided to make this happen. Wireless Philadelphia is an important component of the City's effort to educate our children. By connecting homes with schools we will be assisting in the important work of making sure all of our children are prepared for the future. It will enable all of our school children to learn at home on-line after school wherever they are in the city. It will enable our parents to take an active role in their education. The Philadelphia School 7 District, the Archdiocese, the private and charter schools have been early and strong supporters of this effort. We are well along in developing partnerships and programs that will take advantage of wireless access; for example, the School District's Family Net Program. Wireless Philadelphia will empower low-income families by providing affordable access to information and social services at home and on-line. It will begin to bridge the digital divide for low-income families through partnerships with organizations like the Norris Square Association, the Korean Community Development Organization, People's Emergency Center, Lutheran Children and Family Services, Tech Access PA, Nonprofit Technology Resources, and the Community Technology Centers, One Economy, and many more.

It will encourage college students to stay and start their professional lives in a city recognized 8 as a worldwide technology leader. Drexel University is interested in exploring being an Internet service provider for its 18,000 students and professors that have wireless access on the campus and they want that access around the city. The economic benefits are also substantial. Wireless Philadelphia will level the playing field for the city's small businesses and work force. It will ensure that economically disadvantaged neighborhoods have affordable wireless opportunities. It will give us the needed economic advantage in those neighborhoods. Broadband availability will help local businesses remain competitive, operate more efficiently, and access consumers rapidly. Smaller manufacturers and retailers need access to high-speed networks to work with their business partners. Information businesses can locate anywhere they want and they tend to look for areas with educated work 9 forces, advanced infrastructures, and high quality of life. Knowledge workers expect and require advanced telecommunications support, and the interest of other cities and countries in adopting this as a new standard is intense, and we cannot afford to be left behind. In fact, today we are very honored to have representatives from the City of Johannesburg, South Africa, with us, and they have been looking at our Wireless Philadelphia model, and I believe intend to speak later. Wireless Philadelphia will enhance the experience of tourists and business visitors. The City's increasing dependence on hospitality sector requires that we provide this level of service and amenity. , Independence Visitor Center, the Greater 10 Philadelphia Cultural Alliance and Select Greater Philadelphia to reach out to our tourists and business visitors. Finally, Wireless Philadelphia will enable the City to deliver services more efficiently and more cost-effectively as field workers from inspectors to social workers to assessors to public safety workers can be deployed with technology that connects them to the information and databases that support their daily jobs. And it will also facilitate more on-line interaction with our citizens as more City business can be conducted on-line hours a day, 7 days 17 a week. 18 Before discussing the specific 19 actions we are requesting Council to 20 take, let me briefly describe the major 21 elements of the proposal developed by the 22 administration, Wireless Philadelphia and 23 EarthLink. 24 When fully deployed in 12 to 18 months, Wireless Philadelphia will 11 provide wireless broadband Internet access to the entire city. Residents, visitors, businesses who wish to use the system will be able to sign up with one of at least three competitive Internet service providers, who will provide them with access to the wireless network at an affordable monthly fee. The speed of the network access will be at least times that of dial-up 12 connection and comparable or faster than 13 DSL connections. 95. 16 Unlike other forms of Internet 17 access, users on the Wireless 18 Philadelphia network will be able to 19 access the Internet anywhere in the city, 20 at home, at school, at work, or outdoors, all for the single monthly fee. Wireless Internet access is not intended to replace cable or DSL connections. Many users will continue to utilize these options for the service and 12 speed that they provide. The Wireless Philadelphia network instead will service residents, visitors, and businesses that are not now connected to the Internet or who use dial-up connections that do not support the newer capabilities of the Internet like streaming video and health monitoring and other broadband uses. In addition, Wireless Philadelphia access will be freely available in public spaces around the 13 city.

12 identified free spaces include 14 the Benjamin Franklin Parkway area, 15 Independence Mall, FDR Park, Hunting Park 16 and the Cobbs Creek Environmental Center, 17 among others. 18 Additionally, Wireless 19 Philadelphia will work with each District 20 Councilperson to identify an appropriate 21 park or public space within the district 22 for free access. In order to move forward with this project, we are asking City Council to approve the streetlight use agreement 13 between the City of Philadelphia and PAID and the management and services agreement between the City and Wireless Philadelphia. These two agreements along with two other agreements to which the City is not a party comprise the full transaction. There is a streetlight use agreement between PAID and EarthLink to allow EarthLink to use the city streetlights and there is a network agreement between EarthLink and Wireless Philadelphia that defines how the network will be developed and operated and provides for the Wireless Philadelphia a revenue share. Finally, while Don Berryman will address the issue in his testimony, let me emphasize that the City has been clear with our partners that we intend for the Wireless Philadelphia initiative to advance the administration's goal for disadvantaged business participation. This project will have substantial 14 minority women and disabled participation. I would like to request at this time that City Council consider suspending rules and pass this bill on its first reading. This concludes my testimony. Next Derek Pew will summarize the Wireless Philadelphia transaction, following which Don Berryman will describe EarthLink's plan to design, build, manage, and maintain the Wireless Philadelphia network. At the conclusion of their testimonies, Derek, Don Berryman and myself will be glad to answer any questions that you might have.

Good morning, Councilman O'Neill, Councilman Clarke, members of City Council. I'm Derek Pew. I'm the interim chief executive officer of Wireless Philadelphia. Before I begin, I would like to tell you all how glad we are to be here 15 at this point in this process. This has been a labor of love, but a labor for Wireless Philadelphia. It has been roughly a nine-month process for most of us involved with Wireless Philadelphia, and I would like to acknowledge the members of Wireless Philadelphia's board of directors, if I can, who have donated hundreds of hours of their time, energy, and emotion to this project. I looked around the room. I think we have two here, Chairman Robert Bright and Vice Chair Carol Baker. We also have Tonya Evans-Walls, Leigh Wood, De'Porres Brightful, and Chip Finney, who aren't here. I would also like to say that as a private citizen who got pulled into this project to make this work, it has been an absolute pleasure to work with various members of the administration, Pedro Ramos, Romy Diaz, Clemina Tolson, the entire legal staff that worked on this process with me for Wireless 16 Philadelphia, Kevin Greenberg, Michael Othay, and in particular our own attorney, Stuart Rudoler, who I asked to come here just in case there are questions on the network agreement that he can help me answer, and Tom Speranza. Wireless Philadelphia is a Pennsylvania nonprofit corporation that was established by Mayor Street to plan for and manage the creation of a broadband wireless Internet access infrastructure for Philadelphia. , a private sector company, a for-profit company, and we have created a unique public/private partnership, pursuant to which EarthLink will build, own, manage and maintain at its cost a citywide wireless network. EarthLink is a public company with over 5 million Internet service customers nationally. When the wireless 17 network is in place, EarthLink will service its own retail customers and resell access at wholesale rates to third-party Internet service providers, who will in turn market wireless access to users in Philadelphia. Therefore, we anticipate there will be multiple service providers providing competitive prices and various services designed to appeal to specific customer needs and desires. With EarthLink taking the economic and entrepreneurial risk of the network, Wireless Philadelphia, using revenue from EarthLink and funds raised privately, will work towards the social and municipal goals that drove the Mayor to first propose this project that Dianah outlined in her testimony. In order to build the wireless network, EarthLink will mount wireless devices on approximately 4000 of our city's 100,000 streetlights. EarthLink will spend approximately $22 million over 18 the next ten years to build and maintain that network. The network will provide one megabit per second upstream and downstream capacity throughout the service area and will include a state-of-the-art, multilayered security solution that Don will talk about later to protect the privacy of users. City Council is being asked to approve an agreement between the City and PAID for permission to use these streetlights and a complementary agreement between PAID and EarthLink that will give EarthLink the right to use the streetlights for an initial period of ten years. In return, EarthLink will pay the city about $74 per streetlight per year plus a whole series of in-kind compensation in the form of free and deeply discounted wireless accounts that can be used at the option of the City. The approximately $74 per pole per year is to be paid in two parts, a nonrefundable payment of $2 million to be 19 paid during the first two years of the agreement, and a continuous payment stream starting from the first day of the project to the last day of the project of $24 per streetlight per year for every year of the agreement. The $2 million payment will be paid in accordance with the following schedule: $250,000 after City Council approval.

We are then going to install a mile test, and at the end of that 13 test, after the end of completion and 14 acceptance of that test, we will receive 15 another $750,000, and on the one-year anniversary of that payment $1 million. That's not all that EarthLink is going to give to the City. In addition to paying the City to use the streetlights, EarthLink has also agreed to guarantee nondiscriminatory wholesale access to the network for third-party Internet providers. They have agreed to reimburse the City $300,000 for its inspection costs associated with the 20 installation of wireless devices on streetlights. They have agreed to generally pay Wireless Philadelphia, the nonprofit, a 5 percent of net access revenue stream starting in the second year of the project and continuing to the tenth year. 95 per month for economically disadvantaged users. And I would like to say that Wireless Philadelphia is looking for ways to subsidize that price and drive it even lower. They have agreed to provide free WiFi access in parks and public spaces 16 around the city, provide 1250 free WiFi 17 accounts to the City for the City to use 18 at its discretion, an additional 1750 19 deeply discounted WiFi accounts to be 20 used entirely at the City's discretion. 21 They have agreed to provide 700 22 discounted data T-1s, again to be used entirely at the City's discretion, and they have agreed to provide an unlimited number of WiFi accounts for City use at 21 the best wholesale rate available on the network. To protect Philadelphia and Philadelphians, Wireless Philadelphia will have a series of service-level agreements with EarthLink designed to maintain service levels across the city, provide for the resolution of persistent service problems, if there are any, and address community concerns when and if they arise. These terms are in the network agreement which Stuart and I worked on between Wireless Philadelphia and EarthLink that has been provided to you. In addition, Wireless Philadelphia has entered into a management and services agreement with the City that is designed to ensure that Wireless Philadelphia actively and efficiently dedicates itself to the social and municipal goals that Wireless Philadelphia was created to address. In return, to help fund these 22 programs in the first two years of the project all of the $2 million prepayment received from EarthLink during the first two years will be transferred to Wireless Philadelphia under this agreement after receipt of each portion of that payment from the city. We are asking City Council to approve the management and services agreement, which is Exhibit B to the bill 12 that has been presented before you. Wireless Philadelphia has absorbed the cost of bringing this opportunity to the city. 45 million PIDC in the form of economic stimulus loans, which are to be repaid by Wireless Philadelphia over the first four years of the project. Using the funds received under the management and services agreement, funds received from EarthLink, and what all of us at Wireless Philadelphia hope is a much, much larger amount of money, 23 which is funds received from the public and private charitable sources, Wireless Philadelphia intends to build awareness of digital inclusion programs, develop and provide training programs, and ensure access to affordable computers.

Our goals include providing 10,000 free and additionally discounted computers to low-income households of school-age children, helping community groups supporting at-risk populations to gain Internet access for medical, clinical, and social service information from their homes, working with single-parent families to teach them how to use Internet access to help with day-to-day problems like a sick child or infirm relative, providing training to teach people how to use computers and Internet access to advance themselves, and giving small businesses a more equal playing field when using the Internet to sell or support their products and services. It's a long list. 24 Wireless Philadelphia will not do this alone. We have and we will continue to work with community neighborhood organizations and schools to enhance and improve the effectiveness of the existing programs and to help those groups develop new programs and to take advantage of this new infrastructure. Finally, Wireless Philadelphia will work with City government to find ways to reduce costs and increase the efficiency and efficacy of municipal services, work to find ways to improve the experience of tourists and other visitors that come to the city and make Philadelphia an even more attractive place to live and build a business. Before I close, I would like to stress the international visibility that this project is giving Philadelphia. I have to say that I'm just stunned by what the rest of the world -- the perception of Philadelphia to the rest of the world. While we receive numerous phone 25 calls from cities around the world -- Dianah talked about the City of Johannesburg that is here today. Just this week I was contacted by a spokesperson from Roma Wireless in Italy requesting that Wireless Philadelphia and Roma Wireless cooperate with each other as sister programs in sharing information about the networks that they were and are managing in our respective cities, as they view Philadelphia as their model. And next Wednesday when they go back their press release about what they have already achieved in their city, they want to point to us as being their successful partner. This concludes my testimony. I would be pleased to respond to questions upon the completion of the testimony by Don Berryman, president of EarthLink's municipal wireless division, and here is Don.

Thank you, Derek. Good morning, Councilman O'Neill and Councilman Clarke and members of the City Council. I'm Don Berryman, president of EarthLink's municipal wireless division. It's a pleasure to be here today to discuss our agreements to deliver a broadband wireless Internet access infrastructure for the City of Philadelphia. Before I begin, let me first thank the co-sponsors, Councilwoman Reynolds Brown and Councilman DiCicco, for introducing this bill. Also, I would like to introduce a very important member of EarthLink's team that joins me here today, our general manager for Philadelphia, Clifton Roscoe. Clifton comes to Philadelphia from EarthLink's major projects group in Atlanta and will be responsible for the day-to-day management of the network here in Philadelphia. Let me first tell you a little bit about EarthLink and then some details 27 about our plans here in Philadelphia. EarthLink is a public company headquartered in Atlanta, Georgia. We are the nation's largest independent Internet service provider. 3 million customers throughout the country including more than a 145,000 Pennsylvanians. You have already heard from Dianah Neff and Derek Pew on some of the details of what EarthLink will provide to both the City and Wireless Philadelphia. As you know, EarthLink will bear all of the risk of the cost and the network with no need or guaranty to use public funds. We do not take this risk lightly. We have spent almost five years researching broadband delivery and alternative methods of providing cost-effective, high-speed broadband technology. We have invested in many wireless and broadband over-power-line technologies and believe that WiFi 28 technology solution offers municipal customers the highest level of service at the lowest cost with the highest degree of success. We would not be here today if we didn't believe in the solution, the business model, and our ability to deliver for the City of Philadelphia. We not only believe in our solution, we strongly believe and support the fundamental reasons this project is necessary, to help bridge the digital divide, while at the same time providing a foundation to change the way consumers, businesses, and government employees live and work. This public/private partnership we are forming with the City and Wireless Philadelphia is the beginning of our commitment to this community where we respect the need to become a good corporate citizen, continue to invest in the community over the course of the agreement, and to continue the efforts of 29 Wireless Philadelphia and the City to make this a showcase that others can emulate. EarthLink understands the importance of this project to the residents of the City of Philadelphia and we intend to provide the highest quality network possible. Our business model and, frankly, our contract with Wireless Philadelphia require technical performance that will satisfy Philadelphia citizens. It is for this reason that we will initially install only a 15 square mile test area that will have to be approved by Wireless Philadelphia upon City authorization before we move forward. Similar approvals are required along the path of development and we are contractually bound to certain performance levels on network coverage, speed, roaming, availability, repair times, maintenance, and customer support responsiveness. These levels must be met 30 across the city. Another of the many contributions of our commitment to the City is that of the use of disadvantaged businesses in our services and ongoing operations of the network. 5 percent. 5 million. 21 EarthLink is committed to 22 ensuring compliance with these 23 contractual obligations. To date for the 24 Wireless Philadelphia project, well over 25 50 percent of the subcontractor invoices 31 thus far have been from MBEs or WBEs. Two of these completed purchase agreements are with MBEs. The only full-time contract employee is from an MBE vendor.

EarthLink and its key hardware supplier continue to utilize the MBEC vendor database to seek and assess potential project vendors. We believe that benefits gained by these minority and women-owned companies will expand well beyond the project with skills and experience gained that will be in demand for the cities that are waiting for Philadelphia experience to come into their town. Many surrounding cities and counties have already inquired about bringing the Wireless Philadelphia model into their area. We believe these companies will be well positioned to compete in this new growth business of deploying WiFi and wireless networks up and down the entire East Coast. EarthLink also strives to 32 provide the highest level of security to all users of the network. EarthLink will provide all users a free security application that will ensure the highest level of data security for wireless connections called the gold standard by an industry security rating service. A good customer experience is good business and we will relentlessly pursue the best possible experience on this network. To summarize, in addition to its payment and other obligations under the streetlight use agreements, here is what EarthLink will deliver: Affordable high-speed mobile wireless Internet access, open access to third-party Internet service providers, reciprocal roaming capabilities for hotspot companies, free access in designated City parks and public places, daily and weekly rates for visitors and occasional users, guaranteed network upgrades on an ongoing basis, future products over the wireless network that will allow for more 33 effective services and improve security for the City of Philadelphia. This agreement catapults Philadelphia into a worldwide leadership position in technology and will enable the City to meet the needs of their residents as well as enhance the visitor tourism business climate of this great city. This concludes my testimony. I will be pleased to respond to any questions the council members might have.

Thank you. I just would like to introduce to the witnesses Councilman Frank Rizzo, who joined us at the beginning, and he is now here on the panel. Before asking any questions, I would like to really commend publicly Dianah Neff and her team for the vision they have set forth here. Hopefully, we can come to some positive conclusion on this, not today, but in the near future, but I know that nationally we're being 34 looked at with envy, jealousy, can't wait for it to happen so they can get it to we hope it fails because we are never going to try this and we don't want to be shown up by Philadelphia. But it is truly a potential model for how we can make broadband work for everyone, so I just want to say at the outset that this is one of the most positive things that I have seen from the City in a long time. Before the RFP for wireless was issued, Wireless Philadelphia issued a business plan -- this is going way back -- that set forth five different models under which citywide wireless services could be provided. That business plan concluded that the nonprofit and cooperative wholesale models ranked highest and that the private consortium model ranked low. Is the model now before us a private consortium model? And, if so, how does the proposal before us overcome 35 the disadvantages identified by Wireless Philadelphia in its business plan?

The five different models that we looked at, the one that we settled on is a combination. A pure private consortium model does not have the social goals that we had set forth. You know, a company, a private company, could come in, work with the City to get and lease the poles, but there would be no commitment to the digital inclusion programs that you see with Wireless Philadelphia to the schools, to our small business minority participation. So we think that what we have done is to create a new model that hasn't been used out there. The models that were in the business plan were those that we had been able to find smaller communities using around the country and that through the issuance of a request for proposal -- we wrote the RFP so that we could get alternate proposals on how to do this, and we received twelve 36 proposals. Eight of those were quality ones that we moved forward, and three of those eight included alternate proposals like EarthLink's where they offered to take the financial risk of building this network and still honoring our goals as a city for overcoming the digital divide, economic development into our underserved neighborhoods. So we believe we have taken the best of both the private model and the nonprofit wholesale model and eliminated the financial risk.

Thank you. How is the plan before Council any different than the cable franchise agreements approved by Council in the 1980's? It appears that in effect the City is giving EarthLink a franchise to use City rights-of-way to operate a wireless system. If that is correct, was any thought given to seeking proposals from other companies that might wish to bid on such a franchise? Without such 37 proposals, how do we know that the City is being paid a fair price for the valuable rights to the City's rights-of-way?

Romy Diaz can respond to the cable issue.

Romulo L. Diaz, Jr., City Solicitor. First of all, the agreement specifically provides that in the event there is to be cable or other cable-related products offered, that franchises will be required and that the agreements will not cover that. But the competitive process that was previously outlined and I think you also suggested in your question provided both Wireless Philadelphia and the City of Philadelphia an opportunity to evaluate what we believe to be the true value of the services being offered by the City. Beyond that, as part of the negotiation process, we wanted to make 38 sure that we had a nondiscriminatory approach that we could apply with regard to the value of services to any subsequent entity that might want to have access to those streetlight attachments. So from the City's perspective, we believe that we have provided for both a fair value for the services being provided and one that can be provided in the future on a nondiscriminatory basis to other competitors.

Thank you. Under the City/Wireless Philadelphia agreement, Wireless Philadelphia is required to submit an annual budget to the City and the City may request meetings with Wireless Philadelphia to discuss the budget. Wireless Philadelphia is also required to report each year on how it spends the money, but it appears that neither City Council nor any other City agency has any power to approve or disapprove the budget. Is that correct? 39 And, if so, what controls are there as to how Wireless Philadelphia will spend the money that the City must give to Wireless Philadelphia.

I'm going to send this question to Dianah in a second, but from Wireless Philadelphia's perspective, since we are a private citizen, our management agreement is with the City. So we don't view the divergence between City Council and the administration that we now understand is an internal political issue with the City. So we do report back to the City, and I want to pass on to Dianah to let her respond as to how that information gets distributed.

Correct. Wireless Philadelphia is a nonprofit organization set up to administer through the agreement with the City that we are asking City Council to approve. As an independent entity, we coordinate with the City, but it has a board of directors 40 that oversees the budget and the spending of those funds to meet the goals that have been set out in the management agreement.

Do you have any problem with the City approving your budget?

The solicitor was right in that we are also very willing and open to coordinate with administration on the goals that the City has in these areas and plan to coordinate. The City does have the CIO position as an ex officio board member to oversee that as well.

Do you see a problem -- I didn't hear an answer, but do you see a problem with the City approving your budget?

I believe that we would have to check to see if there is any issue with our standing as a 501(c)(3) organization.

Okay. 41 Thank you. Section 1.6 of the Wireless Philadelphia/EarthLink agreement details the responsibility of the parties for electricity costs. To call these provisions complicated does not do them justice. They appear to say that while EarthLink pays for electricity in the first two years, Wireless Philadelphia must fully reimburse EarthLink for those costs over the remaining term of the agreement. Also, it appears to say that after the first two years Wireless Philadelphia is responsible for electricity costs so long as they do not exceed one-half of the revenues that EarthLink will pay to Wireless Philadelphia. Is that a fair summary of the provisions? If so, why should the City pay a portion of EarthLink's electricity bills?

Romulo L. Diaz, Jr., 42 City Solicitor. Let me be clear, Councilman O'Neill. The City is not paying for these electricity charges. The agreements are very clear that the cost of the electricity is to be borne by Wireless Philadelphia, a freestanding, independent, soon to be 501(c)(3) nonprofit already incorporated under Pennsylvania law. The arrangement as between Wireless Philadelphia and EarthLink fully covers any payment requirements. The City is not a party to any of those payments, does not intend to take any financial risk associated with the electricity costs.

I apologize for the musical chairs. I can actually shed some light because we are involved in these negotiations from Wireless Philadelphia's perspective. Obviously this is an economic 43 transaction between us and a for-profit company. The cost of the electricity, the agreement with PECO is something that was not settled at the time of the contract, and this is just a risk assessment under a contract between two entities entering into a commercial contract. What we made sure in Wireless Philadelphia was that no matter what we wouldn't be put in a position where we actually did not have revenue from EarthLink to pay and, in fact, that we would have excess revenue. So I think the easiest way, the nonlegal way, to think about the electricity arrangement between Wireless Philadelphia and EarthLink is that Wireless Philadelphia will be responsible for the cost of electricity going forward for the next ten years under the agreement, but it will never cost Wireless Philadelphia more than half of its revenue share of EarthLink. And to the extent that the cost of electricity 44 is more than that, EarthLink will pick up that cost. In the first two years, because we are a startup organization, we really can't afford to be spending the money on electricity. EarthLink has agreed to pay for those costs in the first two years so we won't have that burden and we can spend the money that we have on our social programs because coming out of the door that is going to be the most important thing that we do. So that is the complexity part of that agreement, but it is really just a risk in economic sharing that was part of the risk in economic sharing of the rest of the transaction that you would have with any public for-profit entity.

Are you still talking to PECO trying to pin down the costs?

I'm not.

Is someone? 45

Yes, we are. The City is in discussions as well, but Wireless Philadelphia is continuing to meet with PECO, as is EarthLink, on coming up with a rate. This is a new technology. Their structure doesn't know how to treat us, so there are a couple of options. We don't qualify for the City's use of rate on the streetlight use, yet we are not a customer, but they want to treat each pole as a customer and set it up as a separate billing. So we are trying to come up with a new structure that works in this environment, and that takes some time. And we are working, both EarthLink, Wireless Philadelphia, and in the City assisting us as needed.

If I could just amplify on that answer. I have been directly in contact with PECO with regard to this issue. The discussions so far have indicated that PECO understands the desire to address 46 this in a way that works both for the company and for the residents of the City with regard to the Wireless Philadelphia initiative. Everything I've heard to date has been supportive. I think we can work out a resolution that will be in the best interest of all the parties, but, again, clearly the agreement before City Council for approval make it clear the City bears no financial risk with regard to the electricity costs.

Thank you. Concerns have been expressed as to whether these agreements fully protect the City from spending any money now or in the future for the wireless system. I would like to ask -- and it's a good thing you're here, Romy. I would like to did the City Solicitor to please put on the record a statement as to what potential liability, if any, the City is incurring under these agreements, how much will this deal cost the taxpayers at least and in the worst case what is the 47 most that the taxpayers will be asked to pay?

We believe, first of all, that the City does not bear financial or entrepreneurial risk with regard to this initiative or the construction of the network in particular. One of the clear objectives from the get-go has been that taxpayers will not be on the hook with regard to the construction, management and maintenance of the network. That clearly has been assumed by the private partner, EarthLink. We have looked and I have been involved very much in the negotiation of the agreements that were described earlier, and I believe that we have put all possible protections for the City with regard to liabilities, and so from our perspective, for example, EarthLink is responsible for injury or damage caused by its equipment including the installation. EarthLink must indemnify, 48 defend and hold harmless the City and PAID as the conduit for damages arising out of its work or its subcontractors. It must have insurance that fully covers, but in the end it is fully responsible for any of these personal injuries, property damages, or so-called proprietary right injuries that might potentially occur. And those limits are -- I should say they are without limit even though there are insurance coverages that are substantial within the agreements.

So we don't have any liability as far as you are concerned, the City that is?

With regard to the network installation, operation, et cetera, that is absolutely correct.

Do you see any liability outside of those things you just mentioned?

I mean one could conceive of some very speculative 49 City-caused damages where the City potentially might be on the hook, but we are not talking about I believe in the terms of your question those kinds of unusual, speculative situations but one directly related to the installation of this network, its management and operation going forward.

The Wireless Philadelphia/EarthLink agreement permits the parties to terminate the agreement if Council does not approve the ordinance before adjourning for the summer recess. Other than that deadline, is there any particular time constraint for Council's consideration of the ordinance?

Well, the ability to move forward with the programs to address the digital divide, the working with the school are contingent upon building the network and receiving funding. So the impetus to move forward is to allow us to get those programs, and the revenue 50 stream is generated from the building and the running of the network, so we are unable to move forward with our programs without this approval.

I also want to say from Wireless Philadelphia's perspective obviously the sooner this moves forward the better because a significant portion of the funding that we are looking for the City is from private foundations and other public charities and that is sort of subsumed in the catalyst of this network being built, so to the extent that we are delayed in building the network, it just delays conversations we have already been having for relatively significant amounts of money that would not have otherwise been spent in our neighborhoods but for the building of the network. So from our perspective at Wireless Philadelphia, the sooner the better because it lets us get to the business of raising money. 51

You have until the end of the summer recess, but the sooner the better makes a lot of sense for everybody.

Yes. Not only that, we have pilot neighborhoods that were done where companies came in and agreed to sponsor Olney, Norris Square, Historic Square Mile, Ben Franklin Parkway for one year. That expires in April. We are talking to them to extend that. They will not extend it very far because the majority of those are not the winners of this contract. And so it would obviously be a shame to turn off those networks, but we do not have the funding to continue to support them until we build out Wireless Philadelphia.

Okay. Councilwoman Donna Reed Miller has asked, since she has to leave soon, to ask a few questions before then. I will turn over the mike to her.

Thank 52 you, Mr. Chair. Good morning.

Good morning.

It is indeed a pleasure for the citizens of Philadelphia to have the opportunity to experience another dimension of the digital divide. I have some questions here that I would like to ask. Some are for EarthLink. On providing this $9.95 service, how long will this last? Is this locked in, or is this one of those sign up for the first year at $9.95 and then in future years it changes?

I'll answer that question. It's contractually -- we are contractually obligated for the life of the agreement to honor that $9.95 rate.

Very good.

If I could also add, from Wireless Philadelphia's perspective, a number of the private foundations we 53 talked to are actually talking about subsidizing that rate farther, so $9.95 is the contractual maximum that I think we are going to be seeing for digital divide customers in Philadelphia.

Because Derek Pew's testimony says, "Therefore, we anticipate that there will be multiple service providers providing competitive prices and various services designed to appeal to specific customer needs and desires." And I kind of understand that, but can you expand on that a little bit?

Sure. The network that EarthLink is building is an open access network, which means that if you are a community Internet service provider -- Drexel University is a relatively large community, but you could pick other communities of interest. At a wholesale rate they will be able to buy the ability to offer service on the network, and if you are a customer of, say, Drexel University, you wouldn't know 54 that you are a customer of EarthLink. You would think of yourself as a customer of Drexel University on the Internet, and whatever services they viewed as important for their customer base, their students or you could pick any organization around the City that would be interested in being an Internet service provider on the network, they will craft service offerings for their customers that are specific to their customers' needs. And they will be competing for access rates with everybody else in the network, so they will add -- the market will drive the rates to be competitive.

So that basically refers to people who have a particular target population, but for the general public the EarthLink rates will remain the same, correct?

For the general public you will have two possibilities. One will be an EarthLink direct product, 55 and EarthLink will set the prices for that retail product as they see fit, and then there will be other major Internet service providers I just want to say like because I haven't been involved in any negotiations, but like America On-line or like Microsoft Network or those kinds of entities. And to the extent that's who you want to deal with and they happen to be a wholesale provider on the network, you will be able to contract directly with them for service and not with EarthLink. It is also conceivable -- what we placed in this agreement from Wireless Philadelphia's perspective is the ability for Wireless Philadelphia itself to be a wholesale provider under the network. And so if we believe that rates have gotten too high in the market, we can actually step in and under the agreement we don't need any technological know-how ourselves. We can go out and find 56 someone to completely offer all of those services on our behalf in our name. So that's our way of attempting to make sure that pricing also stays reasonable across the entire market.

Will you have some type of community outreach program? Will you set up an advisory board? Many of the companies -- well, we don't have a lot of companies providing service here, but we do have community advisory boards.

Community outreach is a big portion of what Wireless Philadelphia, the nonprofit, is about. Our program for digital inclusion includes using the nonprofit organizations that exist today. Many of them you are going to hear in the testimony about how this is important to them. We believe firmly that we need to work -- and our pilots have shown that by working in the community with 57 community organizations is how you get people connected. They need the trust, the people they know in the networks. We are talking with community technology centers, with the community development corporations in those neighborhoods with companies that refurbish computers that are set up to do training. Wireless Philadelphia will have a small staff, and our outreach and success will be based on our partnerships with those community organizations.

And where do you plan to start? I think in someone's testimony they make reference to doing a pilot. And where would that be geographically here in the City, or have you decided that yet?

There is a 15 square might area in the City that reaches from, I believe, the western side of the City out. It includes a little bit of Temple. I'm not sure what the street boundaries are. 58

It starts at Race, goes north between like the Delaware River towards Kensington area on the north end side. So it's kind of east of Broad and over towards the Delaware and from Race up to Kensington is the 8 square miles. 9 That area was selected because 10 what we are doing in the 15 square mile 11 concept is to test all the technical 12 capabilities of the network. So we 13 wanted to have a cross-section of the 14 different building types, the topography 15 of the land, industrial areas, park areas. That is the best microcosm that allows us to ensure that EarthLink can do everything they say they can do in the network.

And will EarthLink or will the Philadelphia Wireless set up a customer service center? I mean where will customers call if they are having problems? How will that be set up, or where, who. I guess 59 the question is who.

I can handle that question. It's up to the individual service providers that are on the network to handle customer service. So if you are an EarthLink subscriber, you would call EarthLink, who already has customer support organizations in place to serve our 5 million customers. If you are an AOL-like provider, you would call that provider. If you are a local ISP already serving customers and joining on this network, you would call their service for customer service.

Then Wireless Philadelphia is also there to oversee and support if there are community concerns that are not being met by the ISPs.

So then they are accountable to Wireless Philadelphia; is that what you're saying?

That is correct, through our network contract and 60 agreement.

I guess part of this for me is that I probably need a course, a technical course, on what all of this means and how it all fits together. I'm not totally clueless; however, I am not a technical person and I just use the service, and when I have a problem, I call my daughter or I call our technical people here in City Council. Thank you. Thank you.

If another company asks the City for rights to place wireless devices on City facilities, would the City be required to grant such rights, and, if so, under what conditions? Does the EarthLink agreement set a floor or ceiling or both for such future agreements?

The City is not required to grant anyone the ability to use its streetlights and attachments. But what we have provided in the series of agreements is a nondiscriminatory 61 approach, given some hundred thousand streetlights available for placement of these attachments, so that there should be plenty of opportunity for additional competitors to Wireless Philadelphia to attach a device to one of the streetlights not being utilized for this purpose. We are talking about a maximum of 5000 streetlights out of the approximate hundred thousand, so we are talking about a very significant number that would be available. But one of the overarching concerns that we have had throughout the negotiation is to make sure that there was nondiscriminatory access to all Internet service providers who desired access to the streetlights. But as with EarthLink, potential competitors in the future would have to seek and receive a right-of-way license from the City, would have to receive, upon application, a construction permit and comply with all of the types 62 of permits and licenses that people doing business in the City of Philadelphia would do, which is why I said we would not be required to, but we certainly have the resources to make streetlights available to others.

And the costs would be subject to whatever negotiation occurred at that time, or is it kind of within the parameter of what the cost is here?

Because of the Federal Telecommunications Act's requirements that we address this in a nondiscriminatory way, a very critical element of the negotiation was to achieve what we thought was a fair and compensable level of fees for access to the streetlights. We believe that the $74 is an appropriate level for such access, and that's the reason it has been built into this agreement as it has been.

While we 63 are --

Is it 74 or 24? I heard $74 and I heard $24.

We have used the $74 figure as all-inclusive because built into the $2 million calculation is the expectation that that would provide for $50 a streetlight. The $24 a year streetlight rental payment is in addition to that, so together the two figures -- we have been using 74 as an all-inclusive price, but you're right, Councilman Clarke, $24 was alluded to in the testimony, but implicit in the $2 million payments that have been described previously is a $50 rate for each of those streetlights.

I assume no one brought one of the wireless devices with them today?

There.

That's the size of it?

Yes. 64

Same color? I mean is that pretty standard?

Yeah, it weighs about pounds. It's the box with the 6 two antennas coming out. That's what 7 will be on top of the streetlight. They 8 exist now in Love Park, if you drive by 9 there. 10

Okay. 11 Thank you. 12 The City will receive 1250 WiFi 13 accounts free of charge. In addition, the City will receive 750 accounts at a price not to exceed $4 a month. The formula for calculating the exact price is a little confusing. It appears to suggest that the more the City is able to negotiate electricity savings for EarthLink, the more the City must pay for the additional 750 -- 1750 accounts. Is that correct? And I quote from the agreement. If the City and/or Wireless Philadelphia negotiate savings from PECO on 65 electricity to power the communications equipment and the electricity costs falling below $400,000 per year, then the City will pay a price per account calculated according to the following formula: Monthly fee per account equals .5 times annual savings. That is the difference between 400,000 and the lower price negotiated, by 1750. 11

We just wanted to 12 test your math skills.

I have been back around going around on this thing, but I don't think that was your intent, or maybe you know what's in the document, but I wanted to raise the question.

I think that that clause is a good example of how long this negotiation process was for all of us because, again, this goes back to the economics of the transaction, and where we agreed to take on the cost, "we," Wireless Philadelphia agreed to take on 66 the costs, of electricity at a cap level, we had also been offered these accounts. And part of our quid pro quo for taking that electricity was, well, gee, if we get a better deal on that electricity, then okay, we will give you the $4, but if we are not able to get as good a deal, we want a better benefit to the City because it was part of the grander negotiation of all the economic terms of the deal. So you are going to find a handful of things that I'm happy to explain in the agreement, but these were long negotiation sessions over three months on a lot of complicated issues, and you get some funky clauses like that.

But it won't be costing us any more the more successful we are?

That's correct.

Okay. Great. The City/Wireless Philadelphia 67 agreement may be terminated by the City at any time after four years without any liability to the City. If the City does exercise the right to terminate that agreement after four years, what are the implications of such a termination? Who would then oversee EarthLink's performance of its obligations, and what would then happen to EarthLink's revenue-sharing payments to Wireless Philadelphia?

I think I have to start at the beginning of this transaction in order to get to the answer to that question, and I'm going to pass it on to Don after I start. When we made the affirmative determination that it was in the best interest of this City to have a for-profit entity take on the risk of building this network on their own dime, then we were going to essentially lease assets of the City to them at a fair, if not even a high-end-of-fair price, and 68 ask them to provide a lot of other benefits to the City. At the point in time of that determination, the success of the EarthLink model became EarthLink's issue. And that's part of the trade-off of us having picked a public/private partnership instead of raising to $20 10 million at taxpayer cost to build a 11 network that we were entirely in control 12 of ourselves from the get-go. 13 So I wanted to just pass on to 14 Don and Romy. They can talk to you a 15 little bit more about it, but I wanted to give you some sense of where our negotiating stance started in the beginning. It was better for the City not to be on the hook at all in the beginning and let an entrepreneurial entity take the entire risk. This is how this negotiation ends.

I would say this whole negotiation evolved in the bid process in the right direction for 69 the City and its taxpayers. I don't think there is any question about that. The only criticism I ever heard of the plan, when it was a business plan, was that Dianah Neff might know technology but she doesn't know business and this is going to blow up in the City's face because we will never be able to pay off the bonds and all that. And nobody is willing to quite say she is a genius yet on the business side, but she certainly has reduced our costs considerably if they are zero. So, Romy, go ahead.

Thank you, Councilman. I just wanted to clarify one point. I think the four year out issue is related to the management and service agreement between the City and Wireless Philadelphia, the nonprofit. The agreement with regard to the use of the streetlights that Derek alluded to a moment ago are covered by the ten-year 70 lease with the two five-year options for a total period of potentially years 4 under these agreements. So we are not 5 talking about a four year out. PAID, as 6 a conduit, allows us to give the business 7 certainty to EarthLink for the 8 substantial investments to be made in the 9 network. 10

So can the 11 City/Wireless Philadelphia agreement be 12 terminated after four years under the 13 agreement? 14

That is now my 15 understanding, Councilman, yes. 16

That is 17 not your understanding? 18

That is my 19 understanding. We have the same 20 understanding, sir.

At that point the City could chose to have somebody else monitor that agreement at the end of the four years?

Yes. 71

Could the City step in itself to replace Wireless Philadelphia at that point, or could it also have another nonprofit in its place? Is that an option?

There are many options potentially, but I think going back to sort of the basic principles of this transaction, from the get-go it was apparent to the City that a nonprofit entity distinct from the City would be an appropriate vehicle for achieving the socioeconomic goals of the Wireless Philadelphia initiative. It provided protections to the City and its taxpayers. We thought that was appropriate. And we also believed that there was a need for accountability, which is why the future plan for the coming year, the reporting responsibility with regard to the prior year, important decisions requiring the City's sign-off such as the acceptance of the 15 square mile pilot, 72 all those important decisions are to be made by Wireless Philadelphia in consultation and with the approval of the City of Philadelphia. So we believe that we built in a network of sufficient protections for the City's interest, to assure the accountability of the nonprofit, at the same time protecting the City by having an independent nonprofit carrying out the socioeconomic mission.

But in reality this is a top legacy issue for the Mayor, no question about it I think, and the next Mayor comes in, as often happens, wasn't that Mayor's initiative, can't deny it is working, it's doing well, but Wireless Philadelphia wasn't their idea. If they had problems with Wireless Philadelphia for whatever reason and want to change it and say I would like this inhouse, do the payments from EarthLink, the revenue sharing with Wireless Philadelphia, if there were no 73 nonprofit, would the revenue sharing be with the City directly?

The arrangement for the revenue sharing is between Wireless Philadelphia and EarthLink. I would have to provide for the record --

I'm just wondering if there is no Wireless Philadelphia in four years, for whatever reason the next Mayor might decide, and there were no nonprofit to stand in its place, what happens to the revenue sharing? And maybe you can get back to us at a future hearing.

That's exactly what I was going to suggest, Councilman. I would like to provide for the record that response based upon the success of rights that have been written into the agreements.

Okay. Will every resident in the city be able to receive wireless signals from EarthLink's system? What assurance is 74 EarthLink providing us as to the quality of its system, and what remedies will there be if the quality of the system is unacceptable?

That's one of the reasons, Councilman, that we are doing the square mile test, proof of 9 concept area. It is our intent and the 10 intent in the RFP to cover about 90 11 percent to 95 percent of the outdoor 12 areas throughout the 135 square mile area 13 and something near that for indoor 14 coverage as well. 15 Until we get into the City and actually look at in our 15 square mile area exactly the penetration and what the design is going to be to penetrate some of the buildings -- it will be and it has been know that it will cover from the streetlight down, so it will cover about three stories initially down across the City. So in buildings that are taller than three stories, that will be a secondary phase of development of the 75 network.

I believe that outside of any of the three thick agreements that we have right now in front of us, that the best protection we have as a city is your corporate name and your corporate reputation going forward because you have more at stake in this in a sense than we do. We are pretty well insulated. We have a great plan, but if you want to take this through the state, through the country, internationally, this is the incubator that people are going to look at. And I think that is something that is outside the documents and maybe the most important piece of it. My vice-chair, Councilwoman Reynolds Brown? I'll come back later with some more questions.

Thank you, Mr. Chairman. Let me first start out by underscoring comments by Chairman O'Neill 76 with regards to the magnitude of this model and how we have to prove the naysayers wrong, that Philadelphia can get it right and get it right the first time at the door. So your team of diverse professionals, with the operative word on diverse, is appreciated, Dianah Neff.

Thank you.

I made it real clear a couples weeks ago that my interest is very narrow, principally in two areas, how this is going to bridge the digital divide and specifics about the sentence on of your testimony, the substantial minority women and disabled participation. So before we look to the 5.5 million and before we get details on the current 50 percent, I'm first interested in the institutional commitment of EarthLink around MBE/WBE participation. Give us a glimpse of what that is as we speak today. 77

In terms of this project?

No; EarthLink's institutional commitment to MBE/WBE period, separate from this project.

As a company headquartered in Atlanta, Georgia, we do do a great deal. We were mainly, before we got involved in municipal networks, a consumer-based company, so most of our sales and purchases are through the consumer division, but we do care a great deal about being a corporate citizen in the City of Atlanta. We contributed to what is called Tech High in the center city, made a substantial investment over the past seven years to Tech High in the development of skill sets for inner-city kids to learn both computers and technology. And EarthLink was the main contributor to that program in the center city of Atlanta. In terms of our commitment to 78 the MBE purchases and disadvantaged groups that I outlined here, I think the 5.5 million that you quoted is a beginning point. We're committed to the percentages that I read in the to 7 percent. I think it equals on the high 8 end about 36 percent, on the low end 9 about 30 percent, and to date we have 10 reached agreements with MBEC-certified 11 companies here in Philadelphia to over 12 $5.5 million out of the approximately $22 13 million that we intend to spend over the 14 ten-year period. 15 So we think that's a starting 16 point, but we will live up to the 17 agreements that we agreed to in this 18 contract of the percentages to those 19 minority and disadvantaged companies. 20

Could you 21 please provide a list of those companies 22 that currently fit or meet the MBE/WBE 23 requirements to the Chair -- 24

We'd be happy 25 to. 79

-- those that you are currently conducting business with?

Sure.

Can you give us a dollar figure on what High Tech or Tech High --

Tech High.

Tech High.

It was well over a million dollars over the five-year commitment, probably -- I can give you exactly how much we committed to that.

Submit that to the Chair.

Sure.

Might you have a brochure or written material that speaks to EarthLink's MBE/WBE participation currently?

Yes, we do, from the corporation.

If you could please submit that to the Chair. 80

I sure will.

Point of information.

Please.

What interaction have you had already with our MBEC office?

We're meeting -- first of all, we got the database from the City of MBEC-certified companies. Our general manager, Clifton Roscoe, has been meeting with the leaders of MBEC to make sure we are working with the right companies in this area.

So that process has already started?

Yes. We have already contracted with some -- to do the original services that we have had in this area where we built out a couple of square mile areas, doing some of the site surveys, we have already contracted -- the single company that we have done business with so far is an MBE company. 81

Thank you.

Also, from the beginning, even with the issuance of the request for proposal, we worked with the MBEC office to determine the percentages that were required in the RFP for companies to meet when they submitted their proposals, so they have been involved with this project since 2004.

Thank you very much.

What would be the process, procedure, and/or policies for three areas, implementations, monitoring, and then accountability on the back end, once this is in place? Is there a written plan?

For what area?

The implementation of all MBE/WBE activity, the monitoring -- and this is based on our own experience here in the City of what happens with regards to verbal words that are spoken and then what actually 82 comes to reality -- and then, most importantly, accountability in adherence to the commitment that is stated publicly.

We have not seen an adherence plan yet. Obviously, according to the agreement that we signed, we are committed to those percentages in our contracts here, and so we obviously will meet them. I haven't seen an adherence plan yet that we would have to live up to.

Is this something to be ultimately in writing that speaks to what the commitment is?

Right. EarthLink is required to submit reports, once we get the network built out, on a monthly basis and then also annual reports, and as a part of that reporting will be the request they be a part of the monitoring of this commitment.

Submit reports to whom? 83

Wireless Philadelphia.

So again to my question, who -- in the plan will there be discussion and steps, procedural steps, on how both the monitoring and accountability will be addressed?

Councilwoman, if I might respond. The administration has been very clear from the beginning of this initiative that achieving the administration's goals with regard to disadvantaged businesses, minority, women owned and disabled businesses was a value that was important and needed to be addressed. I think I talked earlier in response to a question about the ability to look forward in connection with Wireless Philadelphia plans and to report on progress as a key element of accountability as to all of these achievements with regard to 84 MBEC-certified contractors. We are not in direct privity from a contracting perspective. The City is not contracting directly with EarthLink. But we have established a series of relationships and reporting mechanisms so that we can monitor; that is, the City, the City can monitor and can assure accountability with regard to these requirements which were laid on, as Dianah Neff indicated, in the original RFP which have been added to as standard conditions with regard to the City and PAID agreement and a part of the PAID to EarthLink agreement with regard to the streetlights, and it is clearly a part of the network agreement between Wireless Philadelphia and EarthLink. So we believe that we have built a series of mechanisms that will allow us to assure that there is not only ongoing monitoring and reporting but also accountability with regard to the actual results, because I think we all share the 85 concern that we not put something down on paper only to find out a year or two or three down the road once all of these decisions and dollars have been made and spent, that we haven't gotten the results that we are looking for, so we intend on the City's behalf to be a very active partner in this process.

If I could add to that, what we also don't want is what we have seen with the stadiums. There was serious commitment, both written and verbal, with regards to MBE/WBE participation to the stadiums, another unprecedented monument for the City, and months later Council members 18 were approached by a subcontractor where 19 they were in a circumstance where what 20 was discussed verbally and put on paper 21 in black and white was not being honored. 22 So we don't want that kind of deja vu 23 experience. 24

I can assure you, Councilwoman, that we agree, and that 86 message has been delivered very directly and consistently to our EarthLink partners, and I'm sure that Mr. Berryman may want to address it as well. But that message has been delivered on our behalf by the City and certainly it is being delivered today in this hearing.

Okay. Is there a plan in process to integrate training and/or apprenticeship opportunities with the building and operational aspects of this project?

Councilwoman, I believe you are asking as a part of the buildout of EarthLink?

Yes.

Yes, there is. In the search for companies to do the work that we outline, there is three major areas in the implementation that we will be looking for. That will be in field implementation, the actual work that's done as we roll out this network; the pole installation, which is probably 87 the largest single contract that we will have; and then the site acquisition. That's much smaller but very important. We looked for companies that had that experience, did that work in this area, but we will be working with them specifically with our technology that you see over there in the attachment of those so that the skill that they will learn with us here can be exported to other cities and other counties, as we have gotten all of these requests, as I testified to earlier. So there will be training based specifically on doing the work that we need done throughout the implementation.

Is there a written plan as to how that will be approached, conducted, and executed? And I will say for the record I haven't had an opportunity to read the document and it may very well be in the document that we just became aware of late yesterday. So if it is in the plan, 88 that's a great thing, but if it is not in the plan, then we need to know will there be a written plan as to those particular items?

Yes; that will be in our implementation plan and I will be happy to submit that as well to the Chair.

Councilwoman, are you finished?

Two more.

I'm sorry. I thought you were finished.

Not a problem. Let's move to the estimated 5.5 million or 46 percent. My colleague -- I just went brain dead, so let me move back to the other area, what is happening with young people. I have to collect my thoughts because my colleague just threw me off track. I will speak with Councilman 89 Frank Rizzo later. Councilman Rizzo?

Councilwoman Tasco is ready to roll.

Good afternoon. I just have a few questions about who will install the equipment on -- who will install the poles and then who will install the equipment on the poles, or is the equipment installed on the poles before they are installed?

Let me try to answer that question, and please let me know if I answer it correctly for how you intended it. The equipment is fully operational as it exists right there in that box. So once it's installed and it is plugged into the light pole, it is ready to go. So the only installation would be the pole attachment company that actually has a bucket truck that goes up the 30 feet, attaches it with the brackets on the end of the streetlight, 90 and then plugs it in. That's the full installation.

Who is the company that will do that?

We will have multiple companies. The first company that we have looked at and are contracting with today to do our test model will be the same company that does the square mile area, which is a local 12 MBE-certified company, a subcontractor of 13 ours. 14

What labor 15 union is attached to that company?

I can't speak specifically for that company, but in our agreement we have to pay prevailing wages in the City, and so obviously we'll live up to our obligations under the contract to pay prevailing wages, and any subcontractor we hire would have to do the same thing.

Besides the prevailing wage, what requirements 91 from the unions would -- what requirement would there be from the labor union that covers this installation that the employees be labor members, union members?

There isn't an obligation in the contract to hire the union subcontractors. There is to pay prevailing wages. If that company has union employees, then that's fine with us.

Have you ever worked in Philadelphia before?

Yes, I have.

We had the agreement with another project in the city called NTI. And the agreement was to hire neighborhood people to work on the project in the neighborhoods just on demolition work, and we ran into a problem with a company from outside of the city who did not of course, as the Councilwoman said here, and agreed on paper that we were going to get all of 92 this stuff for people in the neighborhoods. We had to protest to get the company, one, to hire five people and even five people from the labor union. So I think that in your effort to provide -- to meet your minority goals, someone on the City side should give you some background information and educate you about doing business in Philadelphia and the ability to include meeting your minority goals. That's all I want to say about that. It seems that you do -- I was going to ask you what is your staff profile of EarthLink. How many employees do you have, what's the diversity mix, not only -- I'm talking about women and minorities and that kind of thing.

EarthLink as a corporation has around 2000 employees. They are scattered throughout the United States. Almost half of those employees or about half are women and a little over a third are minorities. 93

And how are they in the strata? Are they all down below the glass ceiling or some above the glass ceiling?

If you mean in the glass ceiling our CEO --

CEO, top management, where are they? Are they there?

Yes; we have both minorities and women in top management. The CEO is a male, white male, but from the people that report to the CEO down, we have representatives from almost each minority class. We would be happy to provide that for the record if you like.

That would be helpful if you would provide that to the Chair. Will you, Mr. Roscoe, be the local person on site? Who will be in Philadelphia from your company to oversee this project? 94

It will be a combination of me and my counterpart with Motorola. So Motorola is one of our primary subcontractors, and the two of us will have responsibility for making sure that the network is built out properly.

And that's it? Are you going to hire any other people?

In Philadelphia?

In Philadelphia.

We are working with a series of subcontractors who our subcontractors will be using Philadelphia-based people.

Let's go to your service. You talk about providing a service at $9.99 to lower class families, or I guess lower income families.

Correct.

How do you determine low income and who will monitor 95 that?

Management of the digital divide program is Wireless Philadelphia's responsibility. The initial criteria to determine people that qualify we are modeling after the Federal Communication Commission's Lifeline Program. The Pennsylvania PUC has also adopted it in Pennsylvania. It is essentially a two-part test. The one part is -- for us will be 130 percent of federal poverty level. The other half is whether or not you participate in a handful of different federal assistance programs including things like housing assistance, food stamps, the national lunch program for schools. And there is a process for handling applications that has been used in Pennsylvania for essentially the exact same targets that we are placing for probably about seven years now, and that will be what we use as our means of determining satisfaction participation in 96 the digital inclusion program.

How much staff do you have?

Today?

Well, today and how large do you expect your staff to become in the future?

Today our staff has been kept at the bare bones minimum to reduce costs to the City. So we essentially have a follow volunteer board of directors that has donated their time to the City, an administrative assistant, a couple of consultants. Obviously we have a legal team that works with us, and me, and that's it today. If City Council moves forward and approves this contract, we have already in place both budgetary review and at the board level board discussions and conversations about staffing levels will be required based on things like the number of applications we would expect to see. 97 We are also assembling additional boards, a community advisory board, a general advisory board for philanthropic work. We have an audit committee and there are going to be a lot of volunteer opportunities too at Wireless Philadelphia.

You said a lot of stuff. So your budget -- you borrowed $1.4 million from PIDC, right?

Yes.

1.45 million.

Yes. So then you plan to pay that back from the dollars generated from the EarthLink or from use?

Yes.

From the subscribers?

From the revenue that we receive from EarthLink for the subscribers.

And you 98 expect it to be about how much per year?

I think it is our anticipation that we are hoping to receive about a million dollars a year from EarthLink after the first year. In the first two years we don't receive a 5 percent payment stream. That's why we requested City Council to approve that the $2 million payment go to Wireless Philadelphia in the first two years.

And then after that we are out of the picture, right?

Yeah. I like to think of the beginning part as essentially having been part of the negotiation we structured with EarthLink anyway, so I view you as much as the picture in all aspects of the transaction, not that you are out of the picture at any point in time.

Well, where do my constituents go to complain when they come to complain to me that 99 they are not being treated fairly? What is my relationship to you in trying to convince you that your program is not being fairly operated?

I think that there's really two parts to that. First of all, you will have access to the board. Obviously you can call Wireless Philadelphia and tell us that you think we are not being fair. We are all intending to be as fair as we possibly can in this program. That's why we are involved. At the same time there is also going to be a community advisory board that will be comprised of stakeholders and we are going to be taking a lot of lead from that community advisory group to ensure that we are reaching all parts of the City and that our programs are actually being as effective as they can be wherever we happen to be supporting some community group in the City.

How will 100 you determine who will be on the advisory board?

Whoever is interested should send their resume. Our current board will be reviewing those applications and putting together a community advisory board. They have already done doing that today. They are already working towards that goal.

And if Council offices have a recommendation, we will be happy to take any recommendations.

We are looking for as diverse a group as we can, and I have invited significant community groups that have approached Wireless Philadelphia and suggested to them that they should consider working with us on a community advisory board because they know their constituents better than anybody else does, they know what their requirements are, they know what their programs are, they know how we can help to advance their programs. So we are going to have 101 to take a significant lead from them and we have been strongly encouraging significant community groups to participate with us because we are there to help; we are not there to replace. We are there to augment their programs, deliver additional funding, and provide things that maybe they can't get themselves.

Thank you very much.

Councilman Rizzo.

Thank you. I guess my question will be to Wireless Philadelphia. It is about communications. I'm a little bit confused. I think some of my colleagues received the agreement that was delivered to the office, and there is just a recommendation if this is going to be smooth business. I received an e-mail to my legislative aid saying if I was interested in these documents you can 102 print them. I don't think that's the way we should be doing business, especially if this is as important to you, because this was a document that I just got it this morning. We had to print it out ourselves, not that that's a big deal, but last minute, obviously a lot of paper here, and not a very good communication with me at least.

I agree. I actually thought that these had been distributed earlier, so you are telling me now. I wasn't aware of that. Understand that Wireless Philadelphia is primarily a volunteer organization right now and we're doing everything that we can on a daily basis. Your point is very well taken. There was no intention of not --

I would never think you would do anything like that, to give us anything at the last minute.

No, in all honesty, 103 we wouldn't.

I'm being serious.

I would love you to read all these agreements. As soon as they were available, I wanted everyone at City Council to read the agreements. And I love the question and answer because literally we sat down for three months as a team to try to get the best deal we could for Philadelphia. I encourage the questions and answers for this document.

My next question is to EarthLink.

Councilman, could I follow up please? Two quick points. The first point is that we were asked at the City Law Department, in order to facilitate the Council's staff's review of these documents, to provide it in electronic format so that it could be searchable.

Who asked that? 104

I understand it was from Mr. Auerbach. Secondly, the network agreement, which I believe was the last agreement that was distributed and maybe the one that you had made reference to, previously had a confidentiality provision in it. Because we knew that this was something of interest to Council members, you would want to see the entire transaction and all the documents associated with it, we worked a side letter agreement with EarthLink to make sure that we were consistent with the agreement, making it available and essentially removing the confidentiality restriction, and for that there was some -- there was a requirement for some additional time. So the delay in distribution I think is associated with those two issues, plus the electronic search facility.

And the 105 delay in distribution could be a delay in your project. The other observation to EarthLink, we have a very competent street lighting department, and I think I brought to your attention the fact that you are going to use some devices that will replace photocells that we currently use so you can energize your equipment. Obviously, our maintenance people are going to have to have those devices in the event there is a failure of the photocell that supports the operation of the streetlight. My suggestion is that you give our own street-lighting department an opportunity to be your installer of this equipment. They understand the work. They have the equipment. They are very, very competent, and I would appreciate our own streetlight department having an opportunity to do this work for you, and a lot of the problems that you are possibly going to have to deal with will 106 go away.

We'll address that with the managing director. You know, the streetlight department will be doing the inspection, mounting of the devices, along with the team.

That's not what we heard just a minute ago. We heard that a vendor would be hired with a bucket truck to install them.

To do the installation, but the City streetlight department will do the inspection of those mountings.

How will they get paid for that work?

EarthLink is compensating the City for the cost of that.

My point being is that we are going to assume the responsibility for the maintenance of the streetlight. The first time one of the photocells that is utilized to energize 107 the equipment isn't available to the maintenance person, that's one device that will go down because it will -- it will plug in a regular, standard old photocell and the light will work again, but your device won't. You know what I'm talking about.

I do. The photocell actually sits on top of the plug --

And it plugs into that.

So our radio is plugged in and getting 24-hour, 7-day-a-week power, and so if the photocell broke, only the light wouldn't work, and then they would replace the photocell on top of the plug.

But you will give an opportunity for the install to our own City employees?

I think we could certainly take a look at that. We are not opposed to looking at that as an 108 opportunity. I'm not sure if there would be any legal obligations with hiring the City workers from a private contractor standpoint.

No; you are attaching something that we already own. I mean you are attaching your device to something we already own. Again, I don't want to resolve it here. I just want to give our people the opportunity to get the work. This is a project where they could work -- not a big project. This is something they could do on Saturdays on overtime or whatever. It is an opportunity for them.

Councilman, if I could respond, and of course we will provide a response from the managing director's office and the streets department directly responsive, but I would like to make these three quick points: One, as I had indicated in earlier responses to Councilman O'Neill, we have been very clear in structuring 109 this deal to eliminate liability for the City. It seems to me having Streets Department employees doing the installation eliminates whatever protections we have developed in the transaction. Secondly, the agreements provide for $300,000 to allow the City Streets Department to recover the inspection costs. I believe there are three installation teams with three inspectors that will be covered by that preagreed payment. And, thirdly, just to clarify, hopefully I didn't misunderstand, but just to clarify, that the City's Streets Department will not have responsibility for maintaining the antenna and the components being installed at EarthLink's request.

I understand that.

Anything else? 110 Councilman Clarke.

Thank you, Councilman. Real briefly, this will be covered under the Telecommunications Act, this system?

Because of the nature of the activity, Federal Telecommunications Act requirements apply, and in connection with the fees that have been developed and negotiated, we want to make sure that both those fees would be used on a nondiscriminatory basis for a similar use in the future by EarthLink competitors and we also wanted to make sure that whatever arrangements we were making for access to the network was itself on a nondiscriminatory basis, which is why I think Mr. Pew indicated earlier that the anticipation is that we would have at least four Internet service providers on the network as a minimum in order to achieve those nondiscriminatory goals anticipated under federal law. 111

In the event that there is some change within the company structure of EarthLink sale, restructuring, whatever, and it is a requirement of some discussion as it relates to the contractual relationships to the City, to what degree can we be involved? I'll tell you why I'm asking this question. Recently we had hearings on the cable franchise agreements and it was extremely frustrating trying to get information from those operators, from -- I don't know if it was from Time Warner or who was the most frustrating or the other entity, and consistently they talked about the Telecommunications Act prohibited us from getting certain information. Could the possibility that something like that can happen in the event -- and I'm not suggesting that it will, but things happen. There's some change in ownership with EarthLink or 112 where there is the need to sell off EarthLink or whatever, that we would have a similar situation?

There are two points I would make in response to that question, Councilman. The first is that we have been very clear in these agreements explicitly that under no 10 circumstances is the authorization provided in the agreements to be applicable to a cable or -- I forget the technical term, but it is related to visual technology; that in those instances franchises would be required to be separately authorized. With respect to these series of agreements, assignment rights have to be approved by the City. There will be an opportunity for us to assure that any potential transfer of rights and obligations under the agreements are reviewed by the City.

And that agreement supersedes any 113 Telecommunications Act?

I wouldn't say that it supersedes, but it would be consistent with, we believe, our authority under federal telecommunications law.

Suppose the company believes that that's not the case down the line? I know we have a very cordial relationship right now with EarthLink and we had this similar type of cordial relationship early on with some of the cable franchises, but it got a bit nasty when we wanted to get information during the course of that transaction. And my concern is -- and you are saying that you believe, but you are not saying it in a very definitive term, that we will not find ourselves in a similar position. I'm concerned that we are going down this road and if something like that were to happen, we would find ourselves here four or five years from now trying to get information and be simply told that we don't have the 114 jurisdiction because of the Telecommunications Act to get that information and they don't have to share information pertinent to their individual -- their personal transaction between companies.

I will confirm for the record our understanding in that regard with local counsel for EarthLink, but I can assure you that there has been exceedingly intricate due diligence exercised by EarthLink's attorneys, and in every instance where we have looked at the issues related to federal telecommunications law and the use of PAID and state law with regard to the use of municipal resources for wireless network and all of those major review instances, the EarthLink counsel have agreed with the City's legal opinions. But I will confirm for the record this particular point that you now raise.

Fine. Thank you. 115 Getting back to the number of accounts that will be designated for the City -- and I know there was some earlier questioning. I didn't hear all of the responses. In terms of the distribution of those accounts, how is this going to work? When you say 1250 free WiFi accounts for the City, 1750 deeply discounted used at the City's option, how does all of this work?

It is purely the City's determination whether they choose to use the accounts or not. This will be coordinated through the managing director's office and the Mayor's office of information services.

And I think Romy is probably advising you to talk about counsel's involvement, right?

Excuse me, Councilman. I was just going to suggest that Public Property will be making that decision on behalf of the managing 116 director's office in consultation with MOIS.

I'm sorry. The last part trailed off.

In consultation with MOIS.

So what involvement does City Council have in this distribution of these accounts? Who will we be distributing these accounts to?

Again, the contract specifies the managing director's office that will manage these accounts on behalf of the City.

If I may come at it, first of all, the intention is to focus on areas within the responsibility of the managing director that we believe have this particular need; for example, the mobile licensing and inspections department personnel. We also believe that to the extent that there is a use that would 117 require the expenditure of funds even beyond the initial free accounts, that would clearly be a part of the budget review process on an annual basis that Council would have an opportunity to review. I can't imagine that at the deployment of any of these free accounts or the reduced cost accounts that Council would not have an opportunity to be apprised of that deployment approach and in some instances actually have an ability to approve them where there is a budget implication.

Okay, okay. Thank you. That's enough for me. I have heard quite a bit of information from you. I know we do have a timing issue. I know a lot of people have been waiting here since 10 o'clock, so I'm not going to continue to discuss this at this point from my perspective because I do know that you will be back at some point in time. 118

Councilwoman Reynolds Brown.

A couple of questions. We are expecting the current corporate minority program will be provided to the Chair, as raised in earlier questions. Provide for us, if you will, what the projected new jobs are, how will the vendors here in Philadelphia get the opportunity to bid on those opportunities, which goes back to an earlier question on a plan that speaks to how you seek to ensure MBE/WBE participation. Then moving to the families, the process or plan for signing up those families, how will they qualify, which is Councilwoman Marian Tasco's question as well?

There will be from our network perspective approximately 11 full-time people ongoing after implementation. Almost all of the 119 expense in this implementation goes to subcontractors that we will hire to build the network.

Okay.

We wanted to complete the second part of the question on the families.

Please.

Derek had mentioned earlier that we plan to use the federal guidelines for lifeline in that selection, and it has a two-component part as 130 percent of poverty and qualifications for a number of federal programs.

Okay. Let me just put this on the record. There is a new entity called Benefit Bank, which, in fact, my office will be calling for a briefing for Council members and members of the administration, that will be a one-stop shop for families who are designated low income where they can come and hear and have access to the range of 120 services, tax credits, and programs available to low-income families. So this may be another opportunity to add to that list of services for low-income families, the opportunity with WiFi Philadelphia.

Great. We would love to hear more about it and we will get in touch with you.

Councilman Rizzo.

Thank you. Miss Neff, I believe one of your goals is to reduce costs for our government.

Correct.

When Elliot Shelkrot was here before Council, I asked him a question. They just spent lots of money over there to wire their network. It doesn't seem to me other than the few examples that you use for some wireless technology for L & I and others -- an example -- and I will ask 121 EarthLink also. We spent a significant amount of money with a vendor each month to support our data terminals that are in our police vehicles. Could your technology support that application?

A couple of responses: The wireless network is not intended to replace the 800 megahertz system.

Not police radio. I'm talking about the Verizon contract that we have for data.

Yes. That is at the City's option. That contract I believe is through July of 2007, and at that point the City will have the option to take advantage of free licenses for data with the mobile data access in the vehicles. That is one of the options. And the City will do their analysis and determine if they want to take advantage. That is definitely a way of reducing our costs. Today we pay a mixed price depending on if you are public safety or 122 nonpublic safety for a cellular wireless access. We also spend quite a bit of dollars in connecting our remote facilities. We lease lines called T-1s. As a part of the program that EarthLink is offering, they are offering the City up to 700 T-1s at a reduced cost, which is approximately 40 to 50 percent of what we are paying today. The City will need to go through that evaluation and determine if they want to make the shift to that. That is another potential cost savings for the City.

Could you provide to the Chair a list of opportunities that the City government would have to reduce costs by utilizing EarthLink's network --

Yes.

-- like the deal for the data terminals? The library said that they would only go over to wireless if they were forced to because 123 the technology is slower -- that was a quote -- than a hard-wired computer. Is that yes or no?

I would have to meet with him to understand those comments. The T-1 is a T-1. If they are getting T-1 access into their facility today, they are paying a leased rate for that. This will be the same access except it will be wireless, same speed. It's a point to multipoint.

That's what I thought.

So it may be it is a misunderstanding.

I think there are many of us that think we know what we are talking about when it comes to the technology, but we don't.

Right.

And I don't pretend to know, but I do know there are probably many opportunities for the system to support because I believe the 124 tab for the police department is significant --

Yes, it is.

-- for the data terminals, and if we could reduce that cost, but not give up the quality, I'm okay with that.

Yes.

So I would like to know what opportunities we have to -- and I think that that should put a smile on your face to have more opportunities to serve the government because you are not going to give us this. We are going to have to pay for it, but if it's there, I'm sure that it will be a better opportunity than we may currently have.

It does put a smile on my face. I think the opportunities -- we have seen applications in cities all over the country where they have moved to some of this mobile technology and it has 125 actually increased speed, increased mobility, kept the City worker force out in the districts more rather than coming back in, and it is replacing older, slower networks. So the capability of the network, which will be a network provider, is very, very high quality, very fast, and then it is just the applications that you chose to run over it.

Terrific. Thank you. Thanks, Mr. Chairman.

Thank you, Councilman. Under its bylaws the Wireless Philadelphia board of directors consists of four directors appointed by the Mayor, the City's chief information officer, and four other directors elected by the board. The eight appointed or elected directors serve staggered terms of four years each. The bylaws provide that 126 directors may be removed for cause upon the vote of two-thirds of the directors. Is that the sole method of removal?

That is correct.

That's correct?

Yes.

Except for the CIO of course.

That kind of answers the next question. Will the Mayor be unable to replace a director before the expiration of his or her term of office? Obviously there is one, but that's just been mentioned. How about of the others. Is that pretty clear that they will serve their term other than cause of removal?

The appointed directors are also staggered terms.

So the answer is yes.

So yes.

The City 127 PAID, PAID agreement, includes a provision requiring PAID to abide by the new no-bid contract rules contained in Section 17-1400 of the code. Why are there no similar provisions in the City/Wireless Philadelphia agreement? Section 17-1400 applies to contracts with the City-related agency such as a quasi public corporation which has entered into a continuing contractual or cooperative relationship with the City. Isn't Wireless Philadelphia such a quasi public corporation and, if so, shouldn't it be subject to this new no-bid contract rule under its contract with the City?

It's my recollection, Councilman, that Chapter 19 17-1400 by its terms does not apply to nonprofit organizations such as Wireless Philadelphia, but regardless of that exemption the competitive RFP process that was initiated before the February effective date of 17-1400 has already been complied with. 128

So we have it; we have it now?

We have the competitive response, which is what led to EarthLink's selection prior to the February 1 effective date of 17-1400.

Is the City/Wireless Philadelphia agreement going to apply -- we can argue whether it's a quasi government agency or not. I know it's a nonprofit. But I think at least there is an argument that it's a quasi government agency. Aside from the technicalities of terminology, will there be in the City/Wireless Philadelphia agreement provisions abiding by the new no-bid contract rules? And, if not, why? I guess that's the obvious followup.

My recollection, subject to check, and I will provide you with a written response for the record, is that in all the agreements that I looked at last night, but I will confirm 129 with regard to the management and service agreement between the City and Wireless Philadelphia, there is a provision related to compliance with 17-1400. As a matter of policy we wanted to ensure that in all of these transactional documents that we were inserting standard City conditions, especially as to the most important ones that we have talked about today, only one example of which was the MBEC-related requirements.

Okay. The Wireless Philadelphia/EarthLink agreement provides for a proof of concept period during which a portion of the system will be built and tested, and that has been referred to. But what criteria will be used to determine whether the proof of concept has been successful?

The way this will work -- and I'm trying to make it as nonlegalese as possible -- is there are two exhibits that have detailed 130 specifications and requirements for the network that actually came out of the RFP process -- that's the starting point -- and from those design control documents need to be created by EarthLink for the build-out of the square mile test. 8 Those design control documents 9 not only include the design of the 10 network, but it will also include the 11 manner of testing the design of the 12 network to assure that the service level 13 agreements contained in our primary 14 agreement are satisfied. 15 If we make it through the 15 square mile test, a part of what Wireless Philadelphia is doing and through our technological advisory board also will be looking at the results of those prespecified metrics that we have to agree to before they even build the 15 square miles and determine to what extent they were able to achieve or not achieve the specifications and goals in the agreement. 131 Is that adequate?

Yes. Basically we are proving to Wireless Philadelphia that what we designed and promised in the RFP can be delivered, so it's scope of coverage areas, the signal speed, issues like that will be addressed during that proof of concept.

So you have already agreed on the metrics that have been tested?

What we have agreed to are the baseline metrics that are in the RFP that we are going to use to create the design control documents, but the problem is that they have to go out for the first time in this City and actually build the network and prove it against the specifications, requirements that we have. And if we have to look at what -- if we have to look at modifications of those specifications and requirements, that will be part of the 15 132 square mile test process, but initially we have I think pretty clearly laid out specifications and requirements in the agreement. I can even tell you the exhibits. I think it's Exhibit F and G. Those are the two exhibits in the agreement.

So the final test will be a work in progress during the trial period? As your platform you have what you have agreed on, but you also will be actually kicking the tires once you are out there?

We want to make sure it works before it gets built.

Got you. EarthLink has agreed to keep the system updated with industry standard equipment. What remedies are there if EarthLink does not follow through on that commitment?

EarthLink is generally required to maintain the network at industry standard throughout 133 the course of the agreement. Industry standard is obviously something that we are readdressing all throughout the term of the agreement. Also, if there is some reason why we find -- two things: If we find that the network just generally isn't doing what we thought it was supposed to do, there is a process in the contract where we tell them they need to remedy it, and if they fail to remedy it, we actually go to a third-party consultant. And the third-party consultant actually comes in and looks at the network and decides what might be wrong, and to the extent -- I don't remember the exact legalese, but to the extent it is technologically and in good business -- whatever the legalese was around that, they would have to implement. They have to implement those recommendations. There is also an ombudsman program, so to the extent that the community groups are having some issue 134 with the network, they can come to the joint effort between Wireless Philadelphia and EarthLink where to the extent that there are resolutions to those community problems, technical, and also the legalese around businessly feasible -- that's not a word, businessly, but you know what I'm saying, a feasible solution, that we can -- that they actually have to make those technical modifications. So that's what's in the contract.

We have also agreed on a technical advisory council between EarthLink and Wireless Philadelphia to continually monitor not only the performance of the network but the technology as it gets introduced. Something unique to this technology is new standards get introduced and then they go through a process to be commercialized and then get introduced into the network. For instance, we are going to 135 be kicking this off with 80211-B and 80211-G, which are the industry standard WiFi technologies today. There are a list of other standards that are being approved and worked on today that at some point will have to be introduced to the network.

PAID -- PIDC, its financing arm, PAID, that agreement with the City, and then that organization being the conduit is mentioned throughout this whole proceeding. Why didn't the City just deal directly and is PAID necessary, or what does PAID add to the equation? I just don't want the record to be absent on PAID; that's all, PAID/PIDC.

Thank you, Councilman, for the opportunity to clarify the record. As I understood it in discussions with counsel for EarthLink, the two issues that they were particularly concerned about, given the 136 new model going away from the Wireless Philadelphia financed network through bonds and then going to a totally private financed operation, the concern expressed by counsel to EarthLink to me was that, A, they wanted to have assurance of the ability to amortize the expenses associated with the network build-out. The years, which includes the initial 11 term of ten years and the two five-year 12 option terms, gives them that 13 opportunity. There is potentially an 14 argument that could be made that because 15 there are certain obligations of the City 16 this implicates the four-year-out 17 provision when we don't use an authority 18 such as PAID for purposes of this 19 agreement. And it was the desire for a 20 clear-cut opportunity to have 20 years potentially to amortize their expenses that they raise this issue. The second issue that came to my attention was a concern related to the way in which the structure of the 137 nonprofit had been accomplished. We thought that it provided sufficient protection for the City in connection with any liabilities, but on further discussions with local counsel for EarthLink we thought there was a potential benefit for the City as well. We had the protection of an independent nonprofit, so I constantly remind people there is the City, there is PAID, there is Wireless Philadelphia, an independent nonprofit organization, and EarthLink in this transaction. The City and EarthLink -- I'm sorry. The City and Wireless Philadelphia are not synonymous in terms of their purposes and their entities and their protections, but the PAID conduit provides an extra layer of protection for the City in terms of the liabilities that we talked about earlier that are independent of any protections we would have had through the use of a nonprofit organization. 138

Thank you very much. I had a thought while you were talking but you were so engrossing that I lost it. It had something to do with PAID, but it can wait. The one area that I see missing here -- and maybe it's just that I don't see it, but it's something that I spent a lot of time at the National League of Cities dealing with the -- which was just talking about it. We are actually doing something here with the digital divide question, and that's where the real congratulations above and beyond comes in here, but I find a digital divide to be income, social and age, age at the early end, but age particularly at the latter end. Now, I don't see anything about seniors, and to me you can accomplish more keeping senior citizens engaged, helping them to become engaged if they are not, whether it's with their family, 139 the community around them. People may not be technically disabled, but they may in fact be disabled when it comes to being able to really lead a full life and be out in the world, the ability to access the Internet, the ability to have this kind of service that we are talking about. I don't know if anything is being worked on, but I would hope that it does get worked on sort of as an equal leg in the stool dealing with those segments of our society only having government involvement and will make a difference for. Could you comment on that?

Absolutely. The seniors are an important component of our program. We like to say from cradle to grave that we would be bringing digital learning to our community. We have already partnered in a number of areas in holding training sessions with seniors. I think the 140 Lutheran and Family -- Children and Family Services in Olney is a great example, that in the first class that they graduated of the students were 6 seniors. And they came in to learn, to 7 get access to computers, to know how to 8 use wireless, to stay connected, and so 9 they are a very important element of our 10 community. We focus a lot on children because we want to make sure the future and children have the opportunity to be digitally -- in a digital learning society. But seniors are important. We have done outreach with those as well as people with disabilities or mobility, that are homebound, that can definitely use this. So we are trying to reach out to all elements of our community. I don't know, Derek, if you have anything to add.

Unless you need more.

Councilman Rizzo. 141

That is probably the most important things I heard said today, is the fact that that's a group that's really left behind. You think about some of the things that our seniors can't get too. I think there are grocery stores now where it's great, where you can put your order in, but what good is it if the person can't access it. So my question: A computer is very expensive. Are there stepdown devices that we could have that -- I mean my mom wouldn't need to go and check the Dow Jones. Maybe to send an e-mail to someone someplace in another part of the world. Are there possibilities of stepdown devices that could give minimum access that isn't a laptop that you travel around? You know where I'm heading here. Is there something that is really cheap and fast and easy where a person could do e-mail and also maybe do the Acme order to get some food brought 142 into the property?

There are a number of opportunities. We can all speak to that because we all have been looking at how we can get devices, whether they are a desktop, a laptop, a handheld device low cost. There are many speakers that are here today that are involved in this program that can talk to that. One example is we have been talking to Microsoft. They have a Web-type access device that isn't a full-blown computer.

We have been in discussions with MIT about their hundred dollar device which is a limited P.C., but it doesn't have all of the bells and whistles that the expensive ones have.

That's perfect. That's perfect.

So we are definitely looking.

That's 143 wonderful. That will be the one I need. Thank you, Mr. Chairman.

I now recognize Councilman Michael Nutter.

Thank you, Mr. Chairman. Good afternoon, Miss Neff.

Good afternoon.

On of your testimony you make reference to the streetlight use agreement between the City and PAID and the management and services agreement between the City and Wireless Philadelphia. These two agreements along with two other agreements to which the City is not a party comprise the full transaction. I did receive this morning -- I actually borrowed from Councilwoman Miller the bill and what appear to be the agreements between the City and PAID and I guess PAID and EarthLink, and then Councilwoman Reynolds Brown's staff person gave me a copy of the agreement 144 between Wireless Philadelphia and EarthLink. What is the other agreement that the City is not a party to?

The City is not a party to the PAID/EarthLink streetlight agreement, which is an exhibit to the City/PAID streetlight agreement.

How about if we do that again?

The four agreements in this transaction, Councilman, are the City streetlight agreement as between it and PAID. That is before Council for approval. An exhibit to that agreement is the PAID to EarthLink streetlight agreement. We are not technically a party to that provision, although we have third-party rights under it. The third agreement is the management and service agreement, which is Exhibit B to the bill, and that is between the City and Wireless Philadelphia. And the fourth agreement is the network agreement 145 between EarthLink and Wireless Philadelphia.

Okay. All right. So there are four agreements and within one of the agreements is an exhibit which is the PAID/EarthLink agreement on streetlights?

That is correct.

Solicitor, just for the record, who do you represent in this transaction?

I represent the City of Philadelphia.

Who is the counsel for Wireless Philadelphia?

We have one here. That's Stuart Rudoler. I think there was a reference earlier to Tom Speranza with Kleinbard, Bell & Brecker, our local counsel to Wireless Philadelphia, the nonprofit. And then EarthLink has both local and Atlanta counsel in this matter.

I'm sorry. 146 What was the last thing?

EarthLink has both local and Atlanta counsel in this matter.

Who is the local counsel?

Local counsel is Marilyn Kutler at Schnader Harrison here in Philadelphia.

Can you provide to us through the Chair, I guess for lack of better terms, a bit of an organizational chart showing who is connected to who and who represents who in this particular or whom in this particular transaction?

I would be pleased to do that. We actually have, I think, previously provided to Council -- and I just want to understand the request. There is sort of a depiction of the transaction that shows the relationships through the various agreements and what the rights and privileges are under each, and then we will provide you with a list 147 of counsel representing each of the parties to the agreement. And I'm reminded that I neglected to mention Denise Smyler is also local counsel to Wireless Philadelphia, the nonprofit.

You mentioned that you had provided a transaction agreement?

That's correct.

Is this a chart that you gave us at some time?

I will make sure that we provide that along with a list of counsel representing each of the parties.

Can you also provide to us -- I know you know it by now. I mean I would be pleased to read all of these agreements and make my own notes, but could you provide now as our counsel a facts sheet and analysis of the four contracts.

I would be pleased to do that. 148

Thank you. Let me go back to one technical point, a note that I took down. Mr. Pew, there was a question raised earlier, I think by the Chair, with regard to budget approval, I think involving Wireless Philadelphia. I made a note that part of your response made reference to general City oversight and that there was some -- it was kind of an internal political issue with regard to what City Council's role may or may not be. Do you recall making that statement?

Yes, I think.

This is not a lecture series, but I would only mention to you that I think that it's a little higher than an internal political issue. It's probably more of a separation of powers issue. We are the City Council. We approve budgets. That's what we do.

I appreciate that, Councilman Nutter. All I was suggesting 149 -- the question I think had to do with reporting, and all I was saying is that we have agreed under the management agreement to report back to the City, and the distribution of those reports within the City is not part of Wireless Philadelphia. Wireless Philadelphia is a separate entity, so we were distributing. That was the whole point of my comment.

I understand. And which management agreement are you referring to?

Is it called the management and services agreement? The management and services between the City of Philadelphia and Wireless Philadelphia.

Now, is that agreement one of the four agreements that we discussed earlier?

Correct.

And what's the current agreement between the City and Wireless Philadelphia? What are you 150 required to do presently?

Actually, if I can look at my notes, I will tell you. It's a very long list. I have just been reminded that there is no current agreement until City Council actually approves it, but, if approved, the agreement that is currently in place -- that would come into place between Wireless Philadelphia and the City directs Wireless Philadelphia to manage a relationship with EarthLink under the network agreement, dedicate ourselves to the visual inclusion program, spur economic development in the city, enhance community neighborhoods, reduce the cost of government, maintain a series of insurances. We also have a series of reporting requirements back to the City. We have an annual plan that needs to be provided back to the City on March of every year that sets forth all of our programs that we have put in place to 151 address our goals, a budget setting worth the funding for each of those programs, the key personnel that we have that are going to be responsible for each of those programs, and the goals and metrics for measuring the success of all of those programs. We have a requirement to deliver to the City monthly reports.

Mr. Pew --

I'm just trying to be complete.

I appreciate that. Are you reading from something in the broadband network agreement?

No; this is actually something I put together last night to make sure I could answer that question.

The information that you were just reading into the record, is it somewhere in this agreement?

If Romy puts together the facts sheets for you, it will 152 probably sound very similar to what I just read. It's out of the agreement.

Could you direct me to a section or a page?

It's within the entirety of the agreement. I was trying to outline it so it would be simple to understand.

So do I understand presently there is no 12 operating agreement between Wireless Philadelphia and the City of Philadelphia?

Not that I'm aware of.

That is correct.

So how do you do what you do? I mean under what authority or jurisdiction?

Let me clarify, if I may, Councilman, one point. The management and service agreement between the City of Philadelphia is before Council for 153 approval for, among other reasons, the approval of the transfer of the $2 million that is anticipated to be received by the City from EarthLink to Wireless Philadelphia. And the second point I would make is that although the Mayor was the incorporator of Wireless Philadelphia in March and bylaws were established and a mission for the organization was created, the management and service agreement would in fact provide the contractual basis between the City and Wireless Philadelphia for all of the purposes that Derek and others have summarized.

Well, I understand that. When was Wireless Philadelphia created?

My recollection is March 30, 2005.

And since that time and based on my recollection of the last time Miss Neff was at the table, I think you indicated that you have spent 154 $750,000 on Wireless Philadelphia; is that correct?

We have received $750,000 and just recently received another $700,000.

Okay. Which relates to the 1.4 million that you mention in your testimony, right?

Correct.

I guess I'm trying to understand. If there is no 13 operating agreement between Wireless Philadelphia and the City of Philadelphia, what is the basis upon which you would have either the first $750,000 or a subsequent $700,000 and you have been operating now for a year?

Wireless Philadelphia was incorporated. We have articles and bylaws. We also have a note with PIDC for the funding that states our purposes from both our bylaws and our articles of incorporation and the use of those funds and repayment schedule of 155 those funds.

I have all that. What I'm trying to understand is how do we give a million and a half dollars to someone that has no operating agreement with us?

No one gave anything to Wireless Philadelphia. I think what the chief information officer is trying to describe, Councilman, is a series of loans that have been made by PIDC to Wireless Philadelphia with a repayment schedule over four years that would compensate PIDC for the economic stimulus loans that have been granted and two tranches.

I understand that as well. What I'm trying to understand is in a normal financial transaction -- Wireless Philadelphia has no money and has no access to any money.

Wireless Philadelphia has $1.45 million through loan proceeds, Councilman. 156

It has no 3 money to pay it back because they have no 4 guaranty of funding at the moment until a contract is signed, correct?

That is correct.

So they received a loan with no basis to pay it back because they have no money of their own to make the repayment until we sign this agreement or approve this agreement, correct?

I think I would characterize it as a reasonable expectation that based upon the value of this initiative to the City and its residents that there will be approval, we hope, of City Council for these transactions that would then provide the funds to repay the two loans received from PIDC.

Well, okay. I mean I guess I wish it was that easy to do a transaction with a regular financial institution based on my best interest or 157 my best intentions that I'm a relatively decent person and I think I might be able to pay you back at some point in time. I mean generally they usually like to see a pay stub or something or know that I work somewhere that I have the basis to pay them back, but that has nothing to do with the good quality of what it is we are trying to get done. I was just trying to understand how we make loans to people who have no ability at the moment we give them the loan to pay the money back, anticipating, for all the best of intentions, that this Council will approve something to allow you to pay the money back, and that's what happened here, right?

I think the loans were clearly made in anticipation that there would be ability to repay. And if it would be helpful, we would be happy to supply for the record the loan document to essentially provide the documentary evidence that this is a loan. 158

That would be helpful. I think there have been some stimulus funds provided as loans in the past to certain organizations that were subsequently converted to grants, correct.

I have heard of such, but I do not have personal knowledge of such.

That's a good City solicitor answer. Miss Neff, just a couple questions about the items at hand. Who is the average customer here? Who is purchasing these services?

The goal is to reach out to those citizens and businesses that do not have access to the Internet today and dial-up customers and then obviously anybody else that is interested in subscribing to the network.

I understand. 159 Based on the business model, what's the profile of the average customer?

Mr. Berryman can talk to you on the profile of the customer.

Okay.

I can tell you in our models what we think the average profile of the customer will be. First, they will be those customers who subscribe to dial-up today who either don't have access to broadband or broadband is to expensive.

Let me narrow the question.

Sure.

What's the socioeconomic or demographic profile of the average customer that you think is going to sign up for this service?

We believe there will be two. There will be those customers who subscribe who are on the 160 lower income bracket because they can't afford higher cost broadband services, and then there will be those customers who like the access and mobility of the network who have services either at home or here on business and they probably will be in the middle to upper income bracket.

And what device is this average customer utilizing to access the service?

They will have a computer with a wireless card.

We're talking about a P.C. or laptop?

Either one.

Or a personal digital assistant as well if it has a wireless connection.

What does a laptop cost?

Low-end laptops are under $500 today. The refurbished desktop and computers are under $150. 161

What's a wireless card cost?

$45.

Or less.

Maybe even less.

And there was an issue from earlier about indoor access. Does that require additional equipment?

Not necessarily. We anticipate that with the current equipment that exists today you will be able to access our network. We are encouraging our customers, the EarthLink retail customers, to get a device. It's the little black device on the desk over there with the antenna. The reason we are requiring -- we are asking our customers to get that device is because of two things: It will have software on it that encrypts the connection for the customer between their computer and the nodes or the network. It will have their user name and password 162 already logged into it so that they can stay continuously on the network, but it is not required.

And what's the monthly price for current EarthLink customers?

We have multiple products that we sell around the country. Our premium dial-up account today costs about $21.95. We also have a value dial-up through a subsidiary called people P.C. that averages between $10.95 and $15.95 depending on services that you get with it. And then, of course, we have broadband customers as well.

And what do you anticipate the annual revenues to be?

In our models we anticipate that we will be getting, if we are successful in the roll-out of this -- it really depends on the mix of EarthLink's retail customers versus the 163 wholesale customers. And we have multiple models that will be looking at this as well as additional services on top of it, but we anticipate after the third year to be somewhere between and 7 $18 million a year. 8

15 to 18 9 and Wireless Philadelphia gets 5 percent 10 of the gross or the net. 11

They get 5 12 percent of EarthLink's retail sales. 13

Is that the 14 15 to 18? 15

It's incorporated in that 15 to 18, but if EarthLink is a retail seller on the network, there will be three or four other network sellers as well, and we will contribute from the EarthLink retail accounts. And so if it's 30 percent or 40 percent or 50 percent of the access revenue, Wireless Philadelphia will get the percentage of that revenue.

As you were 164 kind of cascading down, you lost me a little bit. So let's go back. percent 4 of your retail sale -- 5

There is a formula, so let me ask -- Derek is going to pull it out.

We get the greater of one dollar per subscriber or 5 percent, whichever is a larger number, on the retail revenue. And on the wholesale accounts we get a dollar per wholesale account.

So in your model what do you anticipate Wireless Philadelphia's annual revenues to be?

In Wireless Philadelphia's model? Well, I can now just do the math off the 15 to 18 million. We are actually -- our hope is that they reach a success rate of about 20 million, and we are averaging about a million dollars a year in payments from EarthLink. But Wireless Philadelphia's model is only very partially based off of 165 revenue stream from EarthLink. The anticipation is that we are going to use that as a way to augment private charity contributions to what we are doing, and we have already been doing that, and actually the initial -- the initial feedback is that we can actually, hopefully, dramatically increase our budget on an annual basis well, well beyond what we are going to get from EarthLink.