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  • 1. TelCove and Verizon Contract Extensions Charles Strubel, Jr. Director of Commonwealth Telecommunications
    • Commonwealth of Pennsylvania
    • Office for Information Technology
  • 2. 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
  • 3.
    • 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
    TelCove Extension Summary
  • 4. 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
  • 5.
    • 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
    TelCove: Background and Rationale
  • 6.
    • 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
    TelCove: Background and Rationale
  • 7. 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
  • 8. 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
  • 9. TelCove and Verizon Contract Extensions
      • 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
    TelCove Criteria # 2: Service Reliability
  • 10. 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
  • 11. 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 for 2 nd quarter 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
  • 12. 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.
  • 13. 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
  • 14.
    • 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
    TelCove Extension - Specifics
  • 15. 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
  • 16. 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
  • 17. Verizon Extension Highlights
  • 18. 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
  • 19. 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
  • 20. 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.
  • 21. 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)
  • 22. 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
  • 23. Verizon Maintenance Contract Comparison for a 3-Year Term 18 % $ 11,489.42 $ 14,089.53 PSP/CLEAN 21 % $ 41,176.00 $ 51,807.00 DPW/POSNet 27 % $ 8,648.40 $ 11,898.87 DCNR 30 % $ 40,811.81 $ 58,701.00 PennDOT 27 % $ 5,551.43 $ 7,645.00 Revenue Projected % Savings Proposed Estimated Monthly Billing Current Monthly Billing Agency
  • 24.
    • To obtain Copies of this Presentation
    • http:// www.keycomm.state.pa.us/keycomm/site/default.asp