Illlm Foundation Inc1250 SIskiyou Blvd Ashland OR 97520 541 552 6301

December 20 2005

Mr Gino Grimaldi City Administrator

City ofAshlandAshland OR

Dear Gino

The JPR Foundation wishes toexpress to the City in response to the City s invitation at the

Council s November 29 Study Session its interest in assuming responsibility for the Ashland

Fiber Network

As you are aware the Foundation has through its JEFFNET subsidiary been involved as a

partner in AFN s operation since the network s inception We step forward at this point because

we believe the Fiber Network is an important civic resource and because we believe our

experience in the not for profit communications world would enable us to both effectivelyoperate AFN and to do so in a fiscally responsible manner Our goals therefore are to assure

that

Ownership and control over AFN remains with anot for profit entityOwnership and control overAFN remains locally vested

The relationship ofthe participating local ISPs with AFN continues

The City achieves areliable and secure fmancial posture with respect toAFN

We wish to acknowledge and express our appreciation for the support we have received over

the past several weeks from City staff who have been prompt and generous in providing us

information necessary for us to understand of AFN s current operations in order that we could

evaluate our own capabilities for assuming responsibility for AFN That said neith rthe Citynor we have had sufficient time in which it is possible for us to formulate a fully detailed

proposal Assuming the City wishes to ontinue this discussion with us with the goal of

developing a draft agreement we would mutually work to further defme those areas which

require additional informationconsultation in order that a fully specific proposal can be crafhed

With respect to major elements ofthis expression ofintent however we advance the followingbasic components The JPR Foundation would

Assume full responsibility for the system s operation as ofamutually agreed upon date

Annually return to the City a sum currently estimated to exceed the 326 000 figurepostulated in the AFN Options Committee s spin off proforma This sum would be

Fostennf the intellectual5 creative spirit

Mr Gino Grimaldi

City ofAshland

December 20 2005

Page 2

payable for the period ofthe City s bonded indebtedness for the AFN system which we

understand to be twenty years and would constitute our payment for the exclusive rightsownerships and other consideration transferred by the City to the Foundation

Operate the Internet portion of AFN under the current open access model therebyenabling the existing ISPs on the system tocontinue their operations

I would note that this Letter of Intent is crafted for the purpose ofexpressing our intentions based

upon our current understanding ofAFN s operations Our subsequent execution ofaspecificagreement with the City would be subject to approval by the lPR Foundation Board ofDirectors

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On behalf of all current AFN ISPs except Unicorn whqwe couldn t reach

Since AFN s inception a founding principle articulated by the City has been that thesystem would have an open architecture to allow local ISPs the opportunity to

offer services completely tailored to the local community While the ISP businessis not one with a large margin and as a result several of the original ISPs on AFNhave ceased to exist the majority of the ISPs have successfully brought a widerange of distinctive services to Ashland citizens Satisfaction with th servicesprovided by these ISPs remains high And it is clear that the Internet portion ofAFN s operations has been financially successful helping to provide funds to cover

other areas of AFN s operation

High Speed Internet usage by Ashland citizens is higher than e ge The City s

business climate has been significantly stimulated by AFN s attraction ofbusinesses drawn to Ashland by the Internet services available through AFN and itspartner ISPs Examples of such businesses include Plexis Health Carle Treestar andthe Leela Foundation These and other similar businesses bring family wageenvironmentally friendly jobs to the City as a result of the services providedthrough AFN s partner ISPs Additionally the ISPs themselves colleetively add to

the creation of such employment opportunities

Thus both from financial and operational standpoint AFN s ISPs believe thatthe current ISP operations through AFN must be judged a success

While recognizing the overall financial challenges facing the City ov rAFN we

believe the City s ultimate disposition of AFN should be made in light of the

following observations

The 7 originally 9 ISPs have partnered with the City to successfully establish theInternet services offered through AFN During the AFN Options Cornmittee studysession with the City Council on November 29 it was stated that what the Cityreally had to sell or lease was the AFN system s client base While the City owns

the cable TV client base that is not the case for the ISPs customers

Were a sale or llease of the system to include the ISP customer base and not to

include clear provisions assuring the ISPs continued ability to use the system on

terms comparable to those which have existed until now the City would be seekingto sell something customers to which the city has no rightful claim

The ISPs have worked diligently to establish and maintain a mutually supportiverelationship with the City inAFN All of the ISPs have engaged in activepromotion of AJN Internet service over other Internet connection choices forAshland residents Much of the system s success is directly traceable to our

promotional efforts We do not therefore believe it is appropriate for the City toseek to take possession of our client base to sell Such a step would be bothinconsistent with the relationship we have created with the City and we believe

contrary to the wishes of the City residents who are our clients

It is in the spirit of continuing the type of relationship we have historically enjoyedwith the City that none of the ISPs have sought to take protective recourse againstthat possibility

The City should however be aware that one or more ISPs have actively exploredmigrating their Icustomers to DSL connections to replace AFN We recognize that

doing so would likely significantly accelerate public unease over AFN and throwAFN into a serious revenue decline which would at a minimum devalue anddestabilize the City s sale or lease opportunities for AFN

Further complicating the City s financial challenges with AFN or adding confusionto the current circumstance is not our goal We wish to constructively assist theCity in seeking solutions to its current AFN challenges

Accordingly wle wish to respectfully request that the City IF it decides to pursuesale or lease options for AFN do so solely with parties who commit to preserveexisting access arrangements with the ISP partners who have made a long term

investment in hc lping the City develop AFN

Thank you

I tV oJ

i

Mail Tribune Sunday May 18 2003

What Is This Thing Called

The Motley Fool

Remember ShakespeareRemember ils YouLike I

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the truth to the King or QueenThe Motley 1001 tells the truth about

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billion and 1 billion respectIvelymaturing by 2005 as worrisome to

highly doubtfulTelecom has suflered greatly these

past several years Defland fOT productsand services vanished Just as hrms com

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part of this saga i that fraud seems to

have taken a heaVIer toll on the firms

that played fairly as they struggled to

keep up with the phantom growth of

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same competitors are now emergmg

from bankruptcy debt free

Cheats such as WoddCom now

emerging from bankruptcy are in a

better position to compete than before

Worse their defaults have soured the

credit markets on the industry makmgit difficult for the honest firms to getfunding

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ties or sell assets More defaults and

bankruptcies are likely Be careful in

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Lenny Neimark380 Kent Street Ashland OR 97520

541 482 6218

lneimarkiiio pendoo r com

FromDate

Ashland City Council MayorCity Administrator City Finance DirectorAFN Options Committee AFN Programming CommitteeAshland Budget Committee

Lenny NeimarkDecember 18 2005

To

Copy

Honorable Mayor Esteemed Councilors and Weary Staff

Iwanted to add my voice observations and recommendations to the immensityofbabble you have been hearing for all too long now concerning AFN and the upcomingchoices you must make perhaps as soonas this week in regard to its future viabilityand very existence

First let me state that Ihave been aproponent supporter and AFN enthusiast

since it first kicked its tiny little digital feet Iserved for five exciting years as an initialmember ofthe AFN Citizen s Programming Committee As aprivate computer and

networking consultant Ihave assisted and or been responsible for scores of clients and

acquaintances using or switching to AFN internet and acquiring AFN cable TVservicesAs a developer and business owner outside the city limits Ienvy the availability of AFN

quality services to residents and businesses within Ashland services that many outsideAshland do not have easy or reliable access to And as a father ofyoung twins and an

AFN cable and internet using resident of our fine city since day one Ivalue and am

deeply thankful that my city leaders had the foresight years ago to authorize build and

provide me and my family and my neighbors with the many tangible and intangiblebenefits ofour Ashland Fiber Network

That said Iam frustrated disillusioned and even appalled that AFN has been

allowed to descend into the dire straights in which it now finds itself and Ichoose the

word allowed with meticulous care because 1 this deplorable situation was far from

unavoidable and 2 it was caused not by circumstances but bypeople

For the past several weeks now Ihave listened to many in our city tell their

stories ofAFN Ihave asked questions ofcertain staff past and present Ihave read and

reread Tidings articles letters to the editor and other published opinions Ihave

reviewed and studied AFN contracts city minutes ofvarious council and committee

meetings the 2001 AFN Advisory Committee Report the 2004 Navigant report and the

recent AFN Options Committee Report Iperused the recent staff generated AFN

contracting review memos and attended last week s Council study session And frankly I

page 1 of6

am amazed that so many people including seemingly each and every one of ou

continue to ask what has gone wrong or what can we do

This is incredibly easy There is absolutely nothing about ourAFN operationsparticularly now that we are beyond with admitted qualification initial build out that

requires the expertise of rocket scientists much less one more body of consultingexperts after another

Plain and simple the single most causative problem AFN has everhad and

unfortunately continues to have is a management problem apeople problem the

wrong people in the wrong position at the wrong time In anutshell this thing has been

mismanaged from the top And everyone seems afraid tosay it

Quite frankly I thinkat this point it is oflittle consequence or importance to tryto figure out why Iwatched all ofyou last week at the study session tiptoe everso

gently with apoliteness and feigned civility that is ofno service to anyone when it is

costing our city and the people you represent notjust millions of real dollars but also

compromises the very existence of acritical service and infrastructure that other

municipalities and communities across our country are dying to acquire aservice and

infrastructure that could have should have and Ibelieve still can work and provideuntold benefit toour city

So with a respectful and cordial nod to the Peter Principal and to those who have

somehow found themselves in positions ofresponsibility beyond their competence or

capacity to meet Isay thanks for your time and efforts and now please get outofthe

way And since none ofyou councilors mayor or top tier staff seem willing toname

names Iguess it s just going to have to fall to someone from the outside The first to go

has got tobe Mr Holbo current AFN Operations Superintendent He remains the one

constant who has survived the inadequacies ofboth Mr Lovrovitch and Mr

Wanderscheid and it is the considered opinion of many Ihave discussed this with that

Mr Holbo has succeeded in creating a misguided almost personal empire that controls

virtually every aspect ofAFN operations from spending contracting technical services

terms of service availability of services customer satisfaction marketability of services

and who also may single handedly though perhaps unwittingly be responsible for a

preponderance ofthe negative perception that portions of our community have towards

AFN

Notwithstanding Mr Holbo s argumentative defensive and oftentimes

schizophrenic missives as evidenced for example by his August 4 2005 email to the

AFN Options Committee in which he claims to take no umbrage with our erstwhile

Tidings reporter using my statement that includes reticent and butt in the same

sentence or more recently his December 14 2005 email toyou Council with the

subject line AFN Economics 101 wherein he fumbles to justify and excusehimself

against Mr Ed Shull s recently public critique ofAFN in general and ofMr Holbo in

particular how can anyone help but wonder why people throw up their hands and walk

away from AFN For alas this is the public face ofAFN as it exists today

page 2 of6

If anyone cares todig deeper Isuspect you can findplenty of cause or whateverelse it is you may need to ask Mr Holbo to step aside The bottom line in the opinion of

many is that if Mr Holbo stays involved with AFN no matter what you decide to dowith it whether keeping it as acity run entity spinning it off as anon profit turning itinto acommon carrier or any other hybrid whatsoever AFN is doomed to failure He s

got to go

This does not excuse significant mistakes and oversights made and allowed underthe watchofboth Mr Lovrovitch and Mr Wanderscheid but those individuals are no

longer part ofthe current AFN equation so lets notwaste precious time trying to figureout whatwent amuck there As far as Mr Tuneberg s involvement with all due respectMr Tuneberg is not the person tobe overseeing AFN at this critical time This is simplynot his field of expertise At the core AFN s problems are not financial they are

managerial The negative numbers are symptoms People are the cause Which brings us

to Mr Grimaldi

Since Ive managed to out virtually everyone else the other obstacle that many

people see to righting the mismanagement ills that AFN has had to endure so long isthat Mr Grimaldi whether acting or as the case may be not acting due to caution

loyalty tohis staff his imminent departure or lack oftime energy or resources to dig as

deeply as perhaps he should is no doubt notvery inclined tobe asking people like Mr

Holbo to step aside It is likely that both he and Mr Tuneberg are simply too close to the

players and circumstances to see much less act boldly on the big picture And whocould blame them What amess Yet that is exactly what they must do And what youthe Council must urge them to do

On the other side ofthe managerial tipping point you have Mr Ainsworth whohas struggled with way too few resources and far too many operational obstacles to

enable anything having to do with AFN television make sense Isay this with aheavyheart because Ibelieved in AFN TVand I feel personally responsible for many of the

unique and superior channels that we had chosen for our community but the sad realityis AFN television has got to go and along with it Mr Ainsworth becomes acasualty I

see no way with advancing technology requirements upcoming FCC requirements and

hard core competitive realities that AFN television can everbe viable And with thedemise ofAFN television say goodbye to Mr Zauskey as well because with no AFN

television there is no need for cable TVutility billing personnel So what does this leave

us A handful ofAFN technicians and installers with no senior managers Is this a

problem Not for a month or two until an interim director can be brought on boardWill the entire network collapse if we do this No Imean what if Mr Holbo as the onlycurrent operational manager ofAFN suddenly became incapacitated or otherwiseunable toperform his duties Would the network collapse If so then we ve got a much

bigger problem than perhaps anybody ever dreamed of And if not then we can and willsurvive just fine until we bring in the new managerial A team

Please understand this is really difficult I know and very much respect and like a

lot ofthese people But that doesn tmean they should remain or as in the case ofMr

Holbo be entrusted with righting the self created wrongs that have contributed to the

failures ofAFN All the other minutiae ofwhat to do and how to save AFN not

page 3 of6

withstanding the one thing that absolutely has tohappen if any ofthe other steps are

ever to succeed is a complete change ofscenery when it comes toAFN management and

senior operations Ifyou ignore this reality there is nothing else you or anyone can ever

do that will matter You might as well hold your fire sale today and enjoy the bag of

popcorn you ll be able tobuy from the proceeds

Please ask urge or demand that Mr Grimaldi find anew AFN OperationsSuperintendent without delay And take the bold yet easy step ofhiring aqualifiedinterim AFN director now Whether you sell keep or spin offAFN you will need this

person to steer the ship through the transition nomatter how long or briefthat processis Don tworry about someone not being interested in the job because it may soon not

exist Use that possibility as leverage to inspire and motivate an interim director to

succeed and assure his future permanent employment There is no other way There is

nothing that you or anyone else can do that will work if you don t take these unavoidable

steps first

Thank you foryour gracious time and consideration Perhaps Ive waited too longtocommunicate to you what seems so obvious to me But as you can see Ifeel

passionately about AFN and about our city doing everything that it can to ensure AFN s

continued existence economic viability and success Its that important And its that

simple

Respectfully

12LrI

I

Lenny Neimark

page 4 of6

Some additional not so random notes thoughts and suggestions about all this

All ofwhich are secondary to addressing the items discussed on the previous pages

Ive looked at the revenue contracts the expense contracts the operationalcontracts This is not hard Running and managing AFN is not in spite ofall

appearances a terribly complex thing As noted in last week s study session managingAFN utterly pales in comparison to the complexity ofrunning and managing asewagetreatment plant adam and water treatment facility amajor road reconstruction There

is nothing inherently wrong or broken with the basic premise or construct ofAFN Its

ills can almost entirely be attributed to apast and current absence of fundamental

managerial oversight Most any competent smart straight forward committed person

with integrity could run AFN successfully Yes Ithink its that simple

Based on all my discussions with numbers ofpeople here s one solid scenario for

what you our City Council can do to both resurrect and save AFN while also ensuring a

progressive and viable state of the art communications infrastructure for the citizens ofAshland

1 Get rid ofAFN television Sell the subscribers and equipment for as much as you

can get and be done with it2 Immediately dismiss all current AFN top operational management3 Utilize currentAFN technicians along with interim citizen volunteer expertise to

keep the system up and running4 Hire anew interim manager

s Develop job descriptions and hire new permanent managementConsider creation ofa combined AFNjlnformation Technology ComputerServices Department This is already loosely in place Those two functions could

coexist nicely togetherThe new management positions could bea AFN j Information Technology Director Department Head

b Network Operations Director

replaces current Operations Superintendent and oversees both AFN

Services and ITjComputer Services

c Director ofMarketing Emerging TechnologiesEconomic Development

6 Resurrect AFN Citizen s Advisory Committee for ongoing input oversight7 Provide AFN access via wireless to every city resident not currently served who

wants it8 Review set new standards and renegotiate all existing AFN contracts as

necessary including revenue contracts with ISPs and competitive bids or quotesfor services from providers such as Qwest and Hunter

9 Review and revise terms of service as necessary10 Enforce strict new pricing guidelines with clear cut differentiation between

residential and business users

11 Encourage partnerships to resell or redistribute bandwidth to nearbyneighborhoods communities and businesses in a way that ensures ongoingrevenue to the city

page 5of6

Perhaps the new department might look something like this

Cityof AshlandAshland Fiber Network Department of Information Technology

fIlCDnpUlBCStJtkfi

DirectorAFN IInfomtatlon Technology

HttlIId

AFN

WebmasterlWebslte DeveIIT Network Administrator

Tech Support Team

P rammer

AFN Network Administrator

Technicians

Instel s

One last thought regarding the AFN deficit That unfortunate reality at this pointin time has virtually nothing to do with how you choose to address AFN s woes That

debt is now aunique and separate burden on the city that Ibelieve should be

considered coped with and addressed completely apart from whatever decisions you

make concerning AFN and its future The debt remains no matter what So make the

debt problem its own agenda item as you move forward in determining the fate of AFN

page 60f6

AFN Decision Process

David Chapman December 19 2005

What is a Common Carrier or Open Network

In a common carrier network model the owner of the network does

not control the content of the cable The owner provides only the connectionand charges a fee for the use of the system In the open network modell the

use of the network is available to multiple vendors to provide a variety of

services to the consumer over their connection This wholesale model is

very close to what AFN Internet is providing to its customers today AFN

TV could be considered one of these vendors An open network should

allow the true effects of market competition Providing the infrastructure

should reduce the cost of business entry for companies Our system has

some limitations due to the composition of the signals It would be hard to

have competing TV services for instance

What is the difference between public non profit and private networks

The economic purpose of non profit entities can be to benefit the

consumer as opposed to maximizing profit for the owners This does not

mean that sound business decisions are not required It does mean that

community goals could be considered profit The goal of a non profitnetwork might be To provide to the city and all of its residents a connection

to the network with the most bandwidth at the least cost

What is the Common Carrier or Open Network Option

The AFN Options Committee reported that the common carrier optionhad unexplored potential Paul Collins of the Committee and I with the aid

of staff and others have looked at additional options If you assume that

AFN TV can be separated from the operation of a common carrier then

several things become clear The management and operation of the network

alone is simplified and becomes financially viable I have enclosed a

spreadsheet that shows the operation in house It can pay as much or more

debt service than the proposed spin off Therefore this organization could

work either in the city as a service or as a spin offAn initial look at AFN TV as shown that this has been the financial

drain on AFN We have not structured our tiers and rates to cover expensesI think it is possible to turn this around for the present However it is my

opinion that the TV service should not remain in the city due to uncerltaintyin the business and a number of other factors I do feel that it would

preferable to maintain TV as a locally owned and operated service We must

evaluate the sale and spin off offers in terms of public service as well as

reduction of debt

What is the process that we should follow to make an AFN deCision

Follow the path suggested by the AFN Options Committee with

additional considerations

1 Have staff bring to the council offers for the sale or spin off of AFN

Make clear that we would like two types of offers

a AFN as a whole

b AFNTVonly2 Have staff determine what is required to be retained in a sale or what

arrangements must be made with the spin off for the operation of the

city3 In order to evaluate offers we need to be able to place a value on the

system to the city4 Determine how to handle the remaining debt

Ashland Open Net Deptment

Revenue Internet

Revenue highspeedTotal Revenue

Personal Services

Salaries and Wages

Fringe Benefits

Total Personal Services

Materials and Services

SuppliesRental Repair Maintainance

Communications

Contractual Services

Misc Charges and Fees

Other Purchased SuppliesFranchises

Total Materials and Services

Operating income

Capital Outlay

Equipment

Improvements Other Than Bldgs

Total Capital Outlay

Net cash flow

1 235 817

2134831 449 300

Network dir @ 92K Tech Mgr @ 70K 3

309 300techs @ 49K

148 464

457 764

Reviewed by Lee

121 179

54 951

346115 080

Central services portion of this cut about in

142 157 half

2 741

o

339 569

651 968

100 000

20 000

Holbo said 125K 1 time would bring120 000 hardware up to date

531 968