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TelCove and Verizon Contract Extensions

TelCove and Verizon Contract Extensions. 1. TelCove Contract Extension a. Background and Rationale b. TelCove Extension Decision Criteria Financial Options Service Reliability Corporate Viability New Technologies c. TelCove Extension Highlights 2. Verizon Extension Highlights.

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TelCove and Verizon Contract Extensions

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  1. TelCove and Verizon Contract Extensions • 1. TelCove Contract Extension • a. Background and Rationale • b. TelCove Extension Decision Criteria • Financial Options • Service Reliability • Corporate Viability • New Technologies • c. TelCove Extension Highlights • 2. Verizon Extension Highlights

  2. TelCove Extension Summary • TelCove Savings to the Commonwealth: Approximately $32 million • Agency Direct Benefits: • Immediate reductions in long distance • Better service order and trouble ticket Service Level Agreements • NT1 ownership at end of contract • Reduced TSP rates and • Participation in VoIP and wireless technologies

  3. TelCove Extension Highlights - Summary • Current • Commonwealth / TelCove has been a Positive Relationship • 82% Satisfactory Rating. Issues primarily at remote sites, now covered by SLAs • Commitment to Quality Services (Help desk calls down by 1/3 in past year) • Reliable Services – Voice and data troubles below pre-transition levels • Guaranteed best pricing statement from TelCove • Bandwidth availability unimaginable 7 years ago • Future • Expand the reach of the network through enhanced services & new technologies • Continue with low pricing and add new services at mutually agreed upon pricing • Continued commitment to quality

  4. TelCove: Background and Rationale • Provide the Commonwealth with an opportunity to build a strategic infrastructure plan to maximize the opportunity to evaluate new technologies • Given the uncertainty in the regulatory environment with respect to UNE rates, this extension will afford the Commonwealth protection from access cost increases • Keep the Commonwealth moving forward with technology • Continue to provide cost effective, quality telecommunications services

  5. TelCove: Background and Rationale • Through a benchmarking analysis conducted against telecommunications carriers’ usage rates from two similar-sized states, it was determined that the Commonwealth’s current rates are very low in comparison to the market • Type 1 building status committed to significant enhancements to the public network infrastructure (Two or three buildings per month) • Provide the Commonwealth with a perpetual license for the ISS, the ordering and invoicing system at the expiration/termination of the Contract extension

  6. TelCove Criteria # 1: Financial Options • Considered the Total Cost of Ownership for 3 options: • Status quo – current contract rates extended out to 2008 • Issue RFP in 2005 with the risks of higher contract rates and transition costs during economic downturn. 2. Extension – 5-year extension through 2011 with TelCove • Compared to status quo and (3) new contract, the extension is preferable: • 5-year extension offer versus 2 year extension = $ 1.89M / yr. savings • 5-year extension offer verses new contract = $ 4.78M / yr. Savings • Final Agreement: 5-year extension expiring on February 18, 2011

  7. TelCove Criteria # 2: Service Reliability Customer Satisfaction Survey – June 30, 2004: 81.5 % satisfaction rate reported from 33 state agencies • Type 4 and 5 issues (Remote sites) Primary Concern • Customer Service/Installations – issues with installations and poor service • Quality – Future Decline in customer satisfaction addressed in extension through better SLAs • Agencies without remote offices are satisfied

  8. TelCove and Verizon Contract Extensions TelCove Criteria # 2: Service Reliability • Trouble Ticket History March 2004 February 2005 • Data Actual Troubles 76 48 • Non-Data (Voice, video, access) 645 264 • (Does not include administrative trouble tickets, • such as password resets, billing and service order queries) • Service Order History March 2004 February 2005 • Total Orders Issued 1959 1689 • % completed within standard interval 86.8% 96.3% • TelCove Service Level Agreements (SLAs) Since July, 2003 • $ 63,115 in credits have been provided to agencies and the enterprise for missed intervals & outages

  9. TelCove Criteria # 3: Corporate Viability • Bay Harbour Management L.C. is the current investor that controls TelCove. Committed to providing cash infusions if needed. • Commonwealth accounts for approximately 20% of TelCove’s business (An asset and a challenge). • Asset as we were able to secure concessions probably not possible from a larger competitors. • A challenge and a potential asset: • Should TelCove be sold or should Bay Harbour initiate a Incentive Stock Option (ISO), Commonwealth contract could become a valuable component of the change. • Commonwealth has the option to continue with TelCove or successor to 2011 or continue with TelCove until new contractor is awarded the business – both under the current terms and conditions of this contract

  10. TelCove Criteria # 4: New Technologies • Voice Over IP (VOIP): • Product Development Group is in the final stages of creating a VOIP offering. Hardware selection scheduled for2ndquarter 2005 • Internal product training began in October, 2004 • Extensive facilities-based SONET network provides ideal backbone for customer and network-based VOIP solutions • Benefits include • reduced access costs and some long distance usage reductions • expanded disaster recovery capability, • advanced features • LMDS / Wireless Last Mile: TelCove owns many wireless last mile licenses. Current TelCove contract includes LMDS offering

  11. TelCove Extension - Specifics • Service Level Agreements (SLAs): • Voice and Data Services – Penalties apply if more than 2 outages occur in a calendar month and are higher than previous SLA penalties. • Trouble Tickets Time to Restore Service – Penalty amounts have increased based upon the time to restore service • Service Order Completion – Stricter measurements apply to the completion of service orders in the established interval time • Chronic Problems – The frequency of troubles for which an issue is categorized as chronic has been decreased from 4 troubles to 3 troubles.

  12. TelCove Extension - Specifics • Long Distance Discounts and Most favored rates guarantee provided • Discounts for Enterprise Services (To be determined) • The MARC is eliminated beginning February 19, 2009 • NT-1 Equipment: Upon termination of the agreement (for other than a termination for convenience, or upon insolvency) ownership of the • NT-1 equipment will automatically transfer to the Commonwealth

  13. TelCove Extension - Specifics • TSP: Telecommunications Service Priority, where available, will be provided at 10% below the ILEC • Public Safety Site Investments: TelCove will provide enhanced reliability to agreed upon selected public safety sites at no cost to the Commonwealth • Volume Discounts: Monthly recurring charges from Cat 1 and 2 agency billings once agreed upon revenue thresholds are reached

  14. TelCove Extension - Specifics • Perpetual license to the ISS system will be provided to the Commonwealth within 120 days of the extension amendment execution. • The Commonwealth will receive all source code, object code, and documentation for ISS at the termination or expiration of the contract extension • Technology Refresh: TelCove will fund a technology refresh for NOC equipment, and any equipment that supports services covered by a SLA • TelCove and the Commonwealth have mutually released each other from • any obligations regarding the Technology Research Facility • Enhanced/New Technology: TelCove agrees to work with the Commonwealth to develop agreeable pricing for new technology. TelCove will have 30 business days to provide its proposal to the Commonwealth

  15. TelCove Extension - Specifics • Within 180 days, the Commonwealth and Telcove will: • Conduct Voice Over IP (VOIP) Pilot: • Define a group of users to roll out a VOIP pilot to evaluate the benefits of the product. • This pilot program will run for a period of 6 months at no additional cost to the Commonwealth, and will encompass 3 to 4 locations and up to 500 users • Wireless Technology Trial: • Define locations for the implementation of fixed wireless on a pilot basis. • The pilot program will run for a period of 6 months at no additional cost to the Commonwealth

  16. Verizon Extension Highlights

  17. Verizon Extension Highlights Option 3: Extension of Current MAN Contract with Addition of Managed Device Packages • New contract term to 12/31/08, effective upon signature • Enhanced 2-hour on-site maintenance in Harrisburg w/ OA provided spares • 24x7 Monitoring and Management of OA MAN devices • Single Level 2 Configuration Management rate of $154/device/month, regardless of device type • Potential for incremental device rate reduction to OA with addition of DOH, L&I, and/or LCB managed services

  18. Verizon Extension Highlights OA MAN Sites • No termination liability on maintenance and monitoring services • Managed device package for OA MAN DS3 site = $946.74/month • Previous typical agency monthly recurring rate = $1,250.00/month • Includes Cisco 3845 w/ DS3 interface, installation, maintenance, and management services

  19. Verizon Extension Highlights Remote Sites • Managed device package for agency remote site = $450.40/month • Previous typical agency monthly recurring rate = $569.00/month • Includes Cisco 2821 w/ DS1 interface, installation, maintenance, and management services • Agencies may elect maintenance and management packaged services with a contract term between 12 and 36 months.

  20. Verizon Extension Highlights • No CPE termination liability assessed with < 5% device disconnects over the contract term • Annual OA Contract Savings = $117,167/Year ($351,501 over 3 years)

  21. Verizon Solution Benefits to OA • Meets OA’s Requested Objectives • Provides immediate monthly savings to OA • Provides single classification/rate for MAN managed devices • New contract term to 12/31/08 • No termination liability on maintenance and management services • Provides managed device packages for future OA MAN adds • Provides alternative managed device packages for agency remote locations

  22. Verizon Maintenance Contract Comparison for a 3-Year Term

  23. To obtain Copies of this Presentation http://www.keycomm.state.pa.us/keycomm/site/default.asp

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