Title
Regional Utilities Committee Outstanding Referral Item #000102 - Internet Service Companies - Request for a Meeting (B)
Explanation
GRUCom has received several requests from dedicated Internet access service customers to host their Web sites. This, combined with the changing structure of the Internet, led staff to recommend that Web site hosting be offered as a new product line. Staff believes that offering Web hosting services, housed in secure facilities with back-up power, monitoring, and direct connectivity to the Internet will enable the proliferation of Web site creation and design businesses in our community as well as enhance GRUCom's ability to sell dedicated Internet access.
The proposal to add Web site hosting to GRUCom's product line has resulted in an extensive and meaningful dialog with potentially affected local businesses related to a wide range of GRUCom business activities. The issue was referred to the Regional Utilities Committee and was addressed at the July 11, August 17, and December 4, 2000 Committee meetings. As part of the process a special meeting of local businesses, facilitated by a neutral third party (Charles Martin, Ph.D.), was held on November 30, 2000. The Commission backup includes a copy of Dr. Martin's report, which was part of the Regional Utilities Committee's deliberations.
Staff is proposing four steps to align GRUCom's interests more closely with those of local businesses. These are: 1) Adopt an administrative policy that GRUCom will not design or engage in the creation of Web sites except for the clearly intended use of entities of the City of Gainesville as related to its own products and services; 2) Establish an "Authorized Sales Representative" program that provides sales commissions to businesses who market GRUCom's services; 3) Establish a "Wholesale Services" program to provide participating resale businesses with wholesale discounts for access to GRUCom's network systems, allowing residential and commercial broadband access; and 4) Provide contractual and policy protection from predatory commercial practices.
A complete copy of the staff proposal has been included in the Commission's backup material. GRUCom needs to continue to expand its telecommunications activities to be successful and to achieve its mission. However, in light of certain concerns raised by some local businesses, staff is willing to exclude Web design services as a future GRUCom product line.
GRUCom operates in a competitive marketplace. As GRUCom expands, a significant and increasing amount of time and effort will need to be directed to marketing and sales. The creation of an Authorized Sales Representative (ASR) program will allow local businesses an opportunity to share in GRUCom's competitive advantages and successes while benefiting GRUCom at the same time. This ASR program will be developed by staff with input from local businesses with an interest in participating, and will require ongoing review and modification.
GRUCom already sells transport services to other licensed carriers at a discount from the retail price (such as ATT, MCI Worldcom, Interstate Fibernet, etc.). Through a Wholesale Services program GRUCom will extend price breaks to certificated resellers, including Internet Service Providers (ISP's). This will allow resellers to bundle GRUCom products with their own for maximum profitability. The Wholesale Services program will also be developed with input from local businesses with an interest in participating, and will also require ongoing review and modification.
Finally, local ISP's have expressed discomfort in disclosing the identity of potential customers to GRUCom, which is obviously critical in a wholesale sales program. In the past, when a price quote was requested, GRUCom has requested the location of the ISPs' potential customer to determine service availability and price. The ISPs feel that this information provides GRUCom with an unfair advantage since GRUCom could use this information to approach the potential customer with a competing price quote, and perhaps "steal" the customer. To alleviate this concern, all participating wholesale businesses will be provided with updated GRUCom transport service pricing and availability information. The ISP will no longer need to disclose specific customer information to GRUCom during the proposal development stage. To further strengthen GRUCom's commitment to ethical business practices, GRUCom will adopt the following administrative policy: "When a carrier, ISP or other retail service provider presents GRUCom with a valid customer contract for a specific service, GRUCom will not provide a replacement service to that customer during the term of the contract."
Recommendations
The City Commission receive a presentation from Charles Martin, Ph.D. and staff on the issues and process followed to reach the following recommendations: 1) Authorize the General Manager or his designee to negotiate and execute agreements with local businesses to provide them with sales commissions and/or wholesale discounts in order to create a GRUCom Authorized Sales Representative Program and a GRUCom Wholesale Services Program; 2) Authorize staff to proceed with offering Web site hosting services on a retail basis; and 3) Remove Item #000102 from the Regional Utilities Committee outstanding referral list.
Fiscal Note
Providing retail Web site hosting services will positively impact GRUCom's revenue potential and facilitate the growth of local businesses engaged in Web site design. Existing GRUCom equipment has the capacity to provide this incremental service. Other associated costs are minimal and are included in GRUCom's budget. Development of the Authorized Sales Representative and Wholesale Services program is a considered risk, trading short-term revenue margins for long term sales volume.
Drafter
Prepared by Michael L. Kurtz, General Manager
Submitted by Commissioner Pegeen Hanrahan, Chair, Regional Utilities Committee