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Financial Planning and Our Broadband Financial Model <br />Magellan proposes using our Broadband Financial Sustainability Model to ensure that Santa Ana <br />has a full understanding of the business and financial sustainability of various broadband Initiatives. <br />Using these tools will allow Santa Ana to evaluate different business models and make Informed <br />decisions on which are most adequate for the City and community — including environments that <br />require no funding. <br />Our financial models have been specifically developed for broadband utilities and are very similar to <br />electric utility rate studies, Our models are widely used tools to model feasibility and financial <br />performance for over 50 municipal broadband providers. Magellan's financial modeling tools have <br />been utilized to plan and manage broadband network Investments for over $500 Million In broadband <br />projects nationwide, including $250 Million In Broadband Stimulus investments under the NTIA STOP <br />grant program. <br />Using our financial tools, we suggest using the following process to conduct the business model <br />analysis and make recommendations. We would propose using a 10 -year period to analyze the <br />project: <br />1. Develop the cost model for the network, Including one-time and ongoing capital <br />expenditures to build the network. <br />2. Develop the cost model for operations, including O&M, network operations, field <br />services, staffing, billing and customer service. <br />3. From the market analysis and outreach, determine the customer segmentation and <br />growth on the network, across each type of customer (business, school, hospital, etc.). <br />a. Determine customer growth rates for the network, based on benchmarking analysis <br />from other utility and municipal providers. <br />5. Determine a proposed competitive rate schedule for potential services, using pricing <br />Information from the market analysis and benchmarking Information, <br />6. Develop financial statements, pro -formas, depreciation schedules, and cash flows. <br />7. Conduct comprehensive financial analysis on the project to determine overall financial <br />sustainability using key metrics such as free cash flow, debt service coverage, <br />operating margin, and net income. <br />8. Use scenario analysis to evaluate different business models and determine which are <br />feasible for Santa Ana to consider, <br />9. Recommend the most feasible business model based on overall business and financial <br />sustainability, community benefit, and long-term value to the Santa Ana community. <br />J. Wireless Policy Development <br />Like many cities in Southern California, the City of Santa Ana is purchasing street light poles from Southern <br />California Edison (SCE). Santa Ana Intends on purchasing 5,000 poles that will enable energy savings <br />through conversion to LED lighting and will provide new opportunities for revenue from small cell licensing, <br />dark fiber leasing for small cell backhaul and furthering smart city efforts. <br />Magellan proposes to assist the City of Santa Ana in developing wireless policy, master licensing <br />agreements and standards and guidelines for small cell pole attachments. We will provide guidance In the <br />evaluation of controller based connected lighting systems such as CityTouch as well as other smart lighting <br />solutions. Magellan will also evaluate and recommend business models for the City to own and operate <br />}ww+.msnnllao-ndvisnrs. rnm 17 2017 Magellan Advisors <br />