Date of Meeting:
August 4, 1997
Subject: Request Authorization to Contract with ioNET of
Oklahoma for Wholesale Internet Dial-up Service to be Resold to
Residential Customers as a Service of the Stillwater Electric
Background: For the past two years, there have been efforts
to create a Stillwater Electronic Village similar to that created
in Blacksburg, Virginia at http://www.bev.net/welcome/.
The Blacksburg homepage was funded by a grant from the National
Science Foundation and Bell Atlantic and assistance from Virginia
Polytechnic Institute and State University.
Stillwater's efforts began with the formation of the "Stillwater
Connectivity Committee" of the Stillwater Chamber of Commerce.
This committee sought to enhance the Chamber's on-going effort
to market Stillwater as a "Telecommunication Community."
The committee applied for grant funds from Southwestern Bell Telephone
to assist in the start-up costs to create the "Stillwater
Electronic Village." Stillwater did not receive funding because
the selection panel reasoned Stillwater had sufficient resources
of its own to accomplish the project.
The Chamber's Connectivity Committee continued looking for funding
sources and attempted to solicit volunteers from local "high-tech"
firms and other organizations with computer expertise.
A separate committee was formed about the same time consisting
of the computer and management information personnel from the
Oklahoma State Vo-Tech Office, Stillwater Medical Center, Meridian
Technology Center, Stillwater Public Schools, Stillwater Electric
Utility, and Oklahoma State University. They explored ways to
improve the rates of data transmission available in the community.
The effort eventually resulted in what is now known as the Stillwater
Fiber Optic Network Alliance. Their goal is to have a fiber-optic
loop in the community connecting all the public schools, government
buildings, and electric utility substations.
Meanwhile, efforts continued to create a Stillwater Electronic
Village. Cowboy.Net ( Lenape Information Systems ), the only locally-based
internet service provider at that time, proposed an electronic
village called the "Stillwater Intranet," http://www.stillwater.ok.us/.
In contrast to the internet or world wide web, the intranet
would be a local area network primarily for items of interest
to Stillwater residents. Since 1995, Cowboy.Net has provided free
space for the Chamber of Commerce, the Stillwater School System,
City of Stillwater, and others to post their homepages. Cowboy.Net
has worked to increase its customer base so that it could afford
to provide other services but has been limited by competition
from other internet service providers (ISP) like (AOL) and by
other market factors discussed later in this report.
In 1996, another Chamber committee was formed entitled "The
Technology Assessment Committee." Again, the stumbling block
was funding. Should it be funded privately? Or is it appropriate
to use tax dollars? Formation of a non-profit organization to
raise funds was discussed. The committee issued their final report
on May 19, 1997. The report recommended the Chamber continue its
efforts to take the lead in promoting technology in the community:
"We believe effective, local, commercial use of a community
network is critical to the long-term health and viability of Stillwater.
Therefore, we strongly encourage the Stillwater Chamber of Commerce
to move forward to establish the Stillwater Electronic Village."
At a June 27, 1997 special public meeting, the City Commissioners
and Trustees of the Stillwater Electric Utility heard presentations
from two companies in response to the Request for Proposals (RFP)
to provide a fiber-optic network as envisioned by the Stillwater
Fiber-Optic Alliance. The RFP requested two proposals. One was
for a fiber-optic network. The other was for internet services.
In the RFP, the City retained the right to consider the two parts
together as one proposal or to act on each one separately. After
hearing the presentations from Southwestern Bell Telephone and
Brooks Fiber Properties, Inc. and after hearing the recommendations
of the Stillwater Fiber-Optic Network Alliance, individual negotiations
were authorized with Brooks Fiber and ioNET of Oklahoma.
The balance of this report explains the proposal for the Stillwater
Electric Utility to sell dial-up internet service and provides
a contract for review by the utility's trustees.
Source of Revenue for Stillwater Electronic Village
ioNET of Oklahoma's response to the RFP provides wholesale
internet service at the rate of $12.00 per customer per month
for residential dial-up with unlimited usage. IoNET's retail rate
for the same service is $19.95, a rate that is the current national
average. This provides a $7.95 spread for the City to cover billing
costs, delinquencies, and counter time with customers completing
applications for service. City costs are estimated not to exceed
$1.00 per customer. This leaves $6.95 to be applied as follows:
- $1.00 per customer per month
contributed for the development of the Stillwater Public School
Intranet to connect the students, parents, and teachers into the
computer system recently purchased by the School Board.
- $4.95 per customer per month
to be used in the development of the Stillwater Electronic Village.
- $1.00 per customer per month
discount for Stillwater Electric Utility customers and residents
within Stillwater's city limits.
To insure recovery of all costs,
the first proceeds from the sale of services would be used to
establish a delinquency reserve. The reserve would not exceed
ten percent of the current monthly billings for service.
Important Factors for Success
For this proposal to be successful several factors are necessary:
- Community Support: this effort
depends on residents selecting ioNET in order to achieve a benefit
for the schools and the community as a whole.
- Quality Service: ioNET must
provide excellent dial-up service and other value-added services
to earn customer loyalty.
- Content. More organizations
need to provide information for the homepage. A successful homepage
is one that is frequently updated with information of interest
to the residents.
Advantages of the Proposal
- It potentially solves the
problem of a revenue source to develop the Stillwater Electronic
- No tax funds are used. All
funding comes from the users of the service.
- Provides a method to coordinate
the development of the Electronic Village through the internet
service provider so no additional city staff is necessary.
- ioNet has the technical staff
to provide coordination among the contributors to the Stillwater
- Provides an incentive to
the internet service provider to develop a state-of-art Stillwater
homepage in order to increase the number of users of its system.
- The ISP service remains a
private enterprise but is in partnership to achieve a public purpose:
the Stillwater Electronic Village.
- Provides an incentive to
the Stillwater resident to use the service to support the Stillwater
Community and Public School intranet.
- Provides a discount to customers
of the Stillwater Electric Utility with a monthly fee lower than
- The lower monthly rates should
increase the number of users. This, in turn, may increase the
Disadvantages of the Proposal
- Customers may not switch
to ioNET. Heavy e-mail users would have to change their e-mail
address. Those with web pages would have to change their internet
- Relies on one company for
its success in the creation of the Stillwater homepage in the
first year of operation.
- Computer usage is not yet
universal. So the number of customers will not be large.
- Local internet providers
will consider this proposal as governmental interference in the
marketplace. This may result in one or more ISP's no longer providing
service in Stillwater.
Most of the disadvantages have
minor consequences. The first is probably not a problem for people
with two or more years of computer experience. A complete and
understandable set of instructions for switching could help new
users. IoNET has a 24 hour help desk with a 1-800 number.
Relying on one company in the first year could be a problem but
is not anticipated with ioNET. IoNET has to make a three year
financial commitment to purchase data transmission lines and modem
equipment. So ioNET's management wants this to be a successful
long term relationship. All the development funds (excluding the
one dollar/month/customer) goes to ioNET. What is done in years
two through five of the contract depends on our satisfaction with
ioNET's services in creating the electronic village.
The actual number of computer and internet users is unknown in
Stillwater. National averages would suggest thirty to forty percent
of the households have a computer. It is anticipated usage will
increase as the cost of computers declines, multimedia applications
are added, and data transmission speeds increase on the internet.
Concerns from Cowboy.Net, a long term local ISP, and ProValueNet,
a new ISP since November of 1996, are understandable. Both have
invested time and resources in their businesses. This concern
is addressed in the next section of this report.
Internet Service Providers - The Challenge of the Stillwater
Stillwater's market is limited by a large portion of the population
who receive internet service for free if they are university faculty.
These residents are able to dial-in from home through the university
for their service. This further limits the ability of a local
internet service provider to generate sufficient funds to provide
value-added services like an electronic village.
Another financial challenge to becoming profitable is the rapid
change in the speed of the modems in the last two years. As each
new modem speed becomes available, the ISP must buy new equipment
capable to handle the faster modem speeds. This is now further
complicated by competing standards for the new 56 bps modems.
Local ISP's also face tough competition with national providers
who often provide 30 days of free service in hopes of building
"market share." Customers often switch from provider
to provider to get the next 30 days free.
Added to this are the regional bell telephone companies who have
begun selling internet service through their subsidiary company.
In the Stillwater area, it is called Southwestern Bell Internet
Services. This service has been in Tulsa for some time and just
started in Stillwater in July of 1997.
With these factors in mind, many who watch this industry have
concluded consolidation will occur rapidly within the next year.
Without large numbers of customers, the smaller ISP's won't survive.
They will either have to combine with other small ISP's and/or
be bought out by a larger provider. CompuServe is one large provider
that is already having serious difficulties.
While this Stillwater proposal adds further pressure on the local
ISP's, it should not make a difference in the long term outlook
for the smaller providers. It does, however, show there is a window
of opportunity for this proposal that exists now but not in the
future. Once the industry becomes consolidated with a few national
companies, those companies will not care about partnering with
Stillwater to develop the Stillwater Electronic Village. Stillwater
is fortunate to have this opportunity and to be in a position
to take advantage of it with a regional ISP, ioNET of Oklahoma.
IoNET is unique in its offer to contract with Stillwater.
In the final analysis, the Stillwater Electric Utility is not
"getting into the business" of internet service. IoNET
must still compete, buy equipment, and take the risks. The Stillwater
Electric Utility is partnering with the private business to provide
billing services in return for community benefits. This is something
any other ISP can do with any other utility or local business
with an ability to send and collect bills. A "level playing
field" remains for all the ISP's.
The Stillwater Electric Utility has a unique opportunity here
to bring together the efforts of numerous committees and local
citizens to develop both the technological capacity of the community's
citizen's and to develop the telecommunications infrastructure.
Currently change is slow to adopt the technology available. People
do not understand what is possible unless they have experienced
some of that technology in the workplace. Lack of training is
also a problem. Interest is low until one finds a way for the
technology to benefit them. By helping the Stillwater Public School
System develop their intranet for the teachers, parents, and school
children, learning and awareness is improved for a significant
portion of the community; for both the "haves" and "have-nots",
of all ages.
By having a coordinated effort through ioNET to build a community
electronic village, there will be an effort to provide training
and to demonstrate what can be done both for businesses and citizens.
Training could be provided to various civic clubs and associations
to build homepages or e-mail systems to coordinate the activities
of their members. Think how much time could be saved if a group's
officers could periodically survey their members prior to the
next meeting, send change of date notices, and other time-consuming
efforts using the community intranet! The future includes electronic
banking and other conveniences that save us time and money. This
proposal provides some funding to help jump start the adoption
This proposal also ties in with the effort to build a fiber-optic
network in the community. The fiber-optic network increases the
likelihood of attracting new business in the high tech category
and businesses that use this technology. By having a community
that is actively involved in the development of an electronic
village, additional interest is created for companies looking
at sites to expand.
And finally, this proposal supports the city's vision statement
found at http://www.ci.stillwater.ok.us/vision.htm and
the Stillwater city manager's mission statement found at http://www.ci.stillwater.ok.us/extras/goodbye.htm .
And the proposal supports the plans of the Stillwater Public Schools,
Stillwater Chamber of Commerce, Stillwater Medical Center, and
the Oklahoma State Department of Vo-Tech.
Attached is the proposed contract. Approval is recommended.
Report Prepared on July 31, 1997
Report Reviewed by:
Mike Herron, Stillwater Electric Director
Mary Ann Karns, City Attorney
Marcy Alexander, Finance Director
Prepared and recommended by:
General Manager, Stillwater Electric Utility
City Manager, City of Stillwater
Attachments: Proposed Contract
FINAL for August 4, 1997
Internet Service Agreement
- DECLARATION OF PURPOSE
WHEREAS, the Stillwater
Utility Authority is a municipally-owned utility providing electric
service to the residents of Stillwater; and
WHEREAS, the Stillwater Electric Utility pays "dividends"
to the City of Stillwater which are used to improve the quality
of life in the community; and
WHEREAS, the City of Stillwater seeks to improve the opportunities
for its citizens to communicate, share information, and participate
in local and government affairs; and
WHEREAS, the citizens and businesses within Stillwater
would benefit by having access to and assistance in the development
of a "Stillwater Electronic Village" to facilitate communication
among all residents, businesses, governmental units, public schools,
and community organizations; and
WHEREAS, such communication would assist in the preservation
and enhancement of the Stillwater community spirit; and
WHEREAS, the World Wide Web and new telecommunication and
computer technology provide an opportunity to make the communication
process dramatically more efficient to the benefit of all; and
WHEREAS, there have not been sufficient revenues or a collaborative
process available among competing internet service providers to
create the "Stillwater Electronic Village;" and
WHEREAS, multiple community efforts toward the same purpose
over the past two years have been unsuccessful due to the absence
of a means to generate funds from the users of the service or
a means to coordinate the development of a "Stillwater Electronic
WHEREAS, the Stillwater Electric Utility is developing
a community fiber-optic network to bring a state-of-the-art broadband
telecommunication network to the citizens of Stillwater; and
WHEREAS, the existence of the fiber-optic network in Stillwater
will enable and promote the utilization of new technologies requiring
high data transmission speeds and thereby substantially expand
the full range of communication within the community, within the
Stillwater Electronic Village, and on the World Wide Web:
NOW, THEREFORE, THE STILLWATER ELECTRIC UTILITY, AS A SERVICE
TO ITS CUSTOMERS AND THE RESIDENTS AND BUSINESSES LOCATED IN STILLWATER,
ENTERS INTO AGREEMENT WITH ioNET OF OKLAHOMA TO PROVIDE INTERNET
ACCESS SERVICES AND TO DEVELOP A STILLWATER ELECTRONIC VILLAGE
USING A PORTION OF THE PROCEEDS FROM THE SALE OF INTERNET SERVICES
BY THE STILLWATER ELECTRIC UTILITY.
is entered into on August ___, 1997 by and between ioNET of Oklahoma,
Inc. (hereinafter referred to as "ioNET"), and the Stillwater
Electric Utility through the Stillwater Utility Authority (hereinafter
referred to as "SEU"). It shall be for a period of five
years and shall automatically renew thereafter for one year periods
unless either ioNET or the SEU provide the other six months advance
notice of intent to terminate.
- ioNET SERVICES
A. Residential, Non-Commercial Service
ioNET shall provide non-commercial dial-up internet and associated
data services for resale by the SEU to residential customers of
the Stillwater Electric Utility, Stillwater Water Utility, and
residents of the City of Stillwater. The service for resale by
the SEU is for individual personal use and will not to be used
in place of appropriate commercial dedicated service offerings
for connecting servers, for illegal purposes, or in violation
of any provision of ioNET's acceptable Use Policy. IoNET reserves
the sole right to determine appropriate use for this service.
Dial-up service shall consist of modem and IB ISDN access from
any of ioNET's current and future served cities. The service shall
be accessible by standard modems/computers utilizing software
provided by ioNET. The software will be industry standard and
support the majority of computing platforms. ioNET will provide
the installation software at no cost to the SEU. Should it become
necessary to charge residential customers for the software, it
shall be recovered through the activation fee.
IoNET shall be responsible for the cost of providing the dialup
service to the SEU including lines, equipment, and maintenance.
B. Stillwater Electronic Village
ioNET shall provide internet and associated data services
for the purposes of creating the "Stillwater Electronic Village".
ioNET shall set the standards for input of data, and coordinate
the design and layout of the Stillwater Electronic Village to
provide a state-of-the-art series of pages and links using Java
applets, streaming audio and video, and other multimedia techniques.
ioNET shall develop a "chat room" for the listing of
opinions on community issues.
ioNET shall provide free hosting of the City of Stillwater web
pages, the Stillwater School District web pages,
and the Stillwater Electronic Village homepages on ioNET's servers.
Each of these sites shall have a "counter" showing the
number of "hits" for the site.
ioNET shall provide the necessary technical assistance to accomplish
the relocation of the sites from their present locations to ioNET's
IoNET shall use its best efforts to promptly connect new customers
and limit service disruptions.
- ioNET WHOLESALE RATES
Dialup Internet access: $12.00 per month per account billed through
SEU plus a one time $15.00 activation fee.
In the event ioNET's direct or indirect costs to provide the dial-up
internet service increase by more than 10% during the term of
this agreement, ioNET may petition the SEU for a commensurate
increase for services billed to the SEU. If sufficient documentation
is presented to justify the request, the SEU's consent shall not
be unreasonably withheld.
- CITY BILLING RESPONSIBILITIES
Through the City
utility system, the SEU will provide billing to the end user and
take responsibility for collection of all customers signed up
by the SEU. SEU will promptly provide ioNET with completed sign-up
information for each new customer. Names, addresses, and telephone
numbers of SEU customers shall not be rented, leased, sold or
distributed to any other party or used for any other purpose unless
consent is given by the customer.
Existing ioNET customers as of the date of this agreement will
remain direct ioNET customers unless they request to be customers
of the SEU. Customers who switch to SEU billing will be considered
customers of the SEU.
- BILLING AND PAYMENT
- ioNET Billing to SEU
IoNET will invoice
the SEU monthly for customer's internet access with payment terms
of NET 15 from invoice date. Invoices not paid within payment
terms will be subject to a 2% interest charge per month. Any services
will be billed one month in advance of services rendered. The
SEU will notify ioNET of cancellation of service within 5 days.
ioNET will bill ioNET's commercial customers directly.
- SEU Billing its Customers
The SEU shall determine
its schedule of billing and termination policies. Billing
may be done in advance for one month's service and termination
of service may occur on the last day of the month in which service
is paid if payment is not received for the next month's service
before the end of the month.
- Disputed Bills
The SEU shall not
be responsible for unpaid bills resulting from disruptions of
service from ioNET's hardware or software occurring more than
five percent of the total monthly hours of service.
- CUSTOMER SERVICE LOCATIONS
- Technical services to all
ioNET internet service users and customer service to nonresidential,
commercial customers will be provided by ioNET. ioNet will make
a best effort to redirect any requests from Stillwater residents
or electric utility users for sign-up and billing service to the
SEU. Customers who are neither residents of the City nor users
of the SEU or who specifically request to be billed directly by
ioNet will be billed by ioNet.
ioNET will actively
solicit Stillwater businesses by offering a wide range of marketing
sales and connectivity solutions including the establishment of
commercial sites on the web, electronic store design, purchasing
capabilities, and transaction processing.
ioNET will be solely responsible for all marketing other than
that done by the SEU during customer sign up for utility service.
ioNET shall use the following words in all its advertising and
marketing in the Stillwater area: ioNET of Stillwater
- a joint venture with the Stillwater Electric Utility to develop
the Stillwater Public School and Community Intranet.
All use of the Stillwater's logo will need approval of the SEU
prior to its use.
ioNET will provide the necessary sales training to SEU personnel
and/or provide sales personnel during Fall enrollment to sign
up customers for the SEU.
The SEU agrees to
aggressively solicit its residents and SEU customers for ioNET
internet service and to provide ioNET with the necessary documentation
requirements for ioNET to provide said service.
SEU efforts may include providing space in utility mailing when
available, space for training of SEU employees, space for joint
educational efforts and seminars for existing and potential customers,
and space at city hall during fall and spring enrollment periods.
At the request of the SEU, ioNET shall provide assistance during
school enrollment periods. ioNET will provide at its cost all
forms, documents, brochures, advertising, and training necessary
for the SEU to perform the sign up function.
All use of ioNET's logo by the SEU will require approval of ioNET
prior to its use.
- STILLWATER ELECTRONIC
Electronic Village shall be dedicated exclusively to the residents
and to the businesses, organizations, and agencies whose main
offices are located in the Stillwater city limits and/or are customers
of the Stillwater Electric Utility. At the discretion of the SEU
any portion of this site may be restricted to customers of the
ioNET service or may be restricted in accessibility through the
use of passwords to gain access.
The SEU will compensate ioNET for the creation, development and
management by paying ioNET, during the first twelve months of
this agreement, the difference between the rate ioNET charges
the SEU and the rate the SEU charges its customer (minus the one
dollar per account per month for the Stillwater Public School
Intranet). This amount shall be referred to as the "Development
The SEU shall determine which services are to be provided from
the Development Fund and shall prioritize the order of the provision
of the services. Any money remaining in the Development Fund at
the end of the first year of this agreement shall be returned
to the SEU.
The one dollar reserved per month per account for the development
of the Stillwater Public School Intranet will be paid quarterly
to the Stillwater School District by the SEU and shall be used
as directed by the School Board to develop their homepages with
ioNET or to purchase equipment to develop the intranet between
the parents and teachers. At the end of the first year, the SEU
may, at its sole option, continue its contribution to the development
of the Stillwater Public Schools Intranet or may use that money
for some other purpose.
A monthly report showing the allocation and expenditure of the
funds shall be provided to the SEU by ioNET.
All work products resulting from the Development Fund for the
Stillwater Electronic Village shall be the property of the SEU.
Upon termination of the agreement, ioNET will be responsible to
provide the work product in appropriate form for easy transfer
and use as deemed appropriate by the SEU.
- SERVICES TO STILLWATER
FIBER-OPTIC NETWORK MEMBERS
IoNET agrees to
provide the City of Stillwater, the Stillwater Utility Authority,
the Stillwater School District, the Stillwater Medical Center,
and the Oklahoma State Department of Vo-Tech with a 10 % discount
against current company rates for all consulting, programming,
graphic design, web service, and other service offerings provided
by ioNET. These discounts will apply to all promotions and services
offered in the Stillwater services area. See Appendix A for current
rates and alliance discount schedule.
- EXCLUSIVE PROVIDER
For the term of the contract, the SEU is the exclusive provider
of ioNET services within the city limits and to all customers
of the Stillwater Electric Utility except those who reside on
or receive service while on property owned by Oklahoma State University
Likewise, for the term of this contract, ioNET is the exclusive
provider of internet services to the SEU for resale purposes within
the city limits and to all customers of the Stillwater Electric
on the Stillwater Electronic Village and Stillwater Public
School Intranet will be subject to mutual agreement by
the SEU and ioNET in a separate agreement.
If any portion
of this Agreement shall be declared void for any reason, the remainder
of the agreement shall remain in full force and effect.
TERMINATION OF AGREEMENT
are causes for termination of the agreement:
- In the event the revenues
received are insufficient to cover the costs of the SEU in complying
with the terms of this agreement, the SEU may terminate the agreement
upon sixty days notice to ioNET.
- The SEU fails to provide
prompt notice to ioNET when new customers are enrolled or customers
request termination of service.
Mayor, City of Stillwater, Oklahoma President,
ioNET of Oklahoma