The Scottish Government

OUTLINE OF MINUTE OF AGREEMENT BETWEEN

SCOTTISH MINISTERS AND AVANTI CALEDONIAN LTD

FOR THE BROADBAND REACH PROJECT

Contents

• Contract Principles
• Terminology
• Major terms of the agreement
• Minimum Broadband Service Specification
• Pricing
• Technology Description
• Sales and Marketing Services

1. Contract Principles

The contract with Avanti was designed with the following principles and limitations in mind :

• Financial.

i. The maximum grant available was £3.4m which was to be spent as effectively as possible.

ii. The bulk of the funding will depend on customers signing up and will relate to evidenced service delivery.

iii. The funds were capital funds and there was no on-going revenue support available.

iv. The broadband provision should be self supporting and sustainable after the project is complete.

Hence the project pays for the initial capital, installation cost of each customer that signs up and the on-going costs are met from customer subscriptions with no on-going revenue support from the Scottish Government. This will tend to ensure that the provision of broadband is self supporting after the end of the project.

• Number of registrants

i. There were more than 3,800 individuals and businesses registered as eligible for the project from locations right across Scotland. These are included in the contract as Annex F (Annex F not included in this web edition due to Data Protection Laws)

ii. Avanti has guaranteed to provide broadband to all those in Annex F that sign up as customers

iii. Provision has been made for additional registrants, subject to the limitations of the maximum grant available

The Avanti guarantee is supported by the evidencing to the Scottish Government of the connection of individuals whose names are registered, ensuring that the funding is appropriately targeted. The Scottish Government maintains a late registration list which is included into the project in such a manner to ensure that these registrations are affordable.

• Timeliness

i. It is of the essence of the contract that all customers that sign up and return their contract documents to Avanti by the end of April 2009, will receive broadband by the end of May 2009.

ii. No funding will be available for those sites that do not contract with Avanti by the end of April 2009.

It is therefore to the advantage of Avanti (and the Scottish Government) to maximise the effectiveness of the marketing to individuals to ensure that sign-up is early in the project to ensure that delivery can be undertaken efficiently within the timetable.

2. Terminology

Annex F the list of registrants provided to Avanti. These individuals or businesses registered with the Scottish Government by the end of May 2008 and were, as far as was practicable, verified as eligible for the project. This list can be amended using the consensual change control process.

Scottish Government Formally the Scottish Ministers; normally known as the Scottish Government although sometimes referred to as the Scottish Executive

Services This term includes retail broadband services (to individuals and businesses and wholesale broadband services (to Internet Service Providers and telecommunications companies)

Service Providers Internet Service Providers and telecommunications companies that may choose to make use of the wholesale broadband services

3. Major terms of the agreement

Warranty Avanti shall provide broadband services to every potential customer detailed in Annex F who, before 30 April 2009, submits a valid order form for broadband services.

Service Provision Avanti shall provide the Services during the Contract Period. For the avoidance of doubt, the Scottish Government and Avanti have agreed that, in relation to the delivery of Services, Avanti will enter into separate contracts with individuals, businesses, Internet Service Providers and telecommunications companies.

Contract Period The contract began on the 26th June 2008 and will end on the third anniversary of the Commencement Date, unless the Scottish Government has, at any time prior to that date, given notice to Avanti extending the period of the contract by a further period of up to two years. [ Note : it is intended that such notice will be given shortly ]

4. Minimum Broadband Service Specification

Avanti will ensure that Services meet the following minimum specifications:

· all solutions will use asymmetrical broadband technology;

· all solutions will have a maximum contention ratio of 50:1

In providing the Services, Avanti will provide:

· sufficient network capacity to ensure that any initial demand for broadband services is met without delay in service delivery to any customer; and

· sufficient network capacity, for the duration of the Contract Period, to meet the minimum specifications in respect of those broadband services being provided to all customers .

Avanti will ensure that the Services are secure and in particular that they provide sufficient:

· access control (to ensure unauthorised users are excluded access);

· authentication (to enable the assurance of identity of person or originator of data);

· availability (to enable legitimate users to have access when needed);

· confidentiality (to prevent disclosure to unauthorised persons); and

· integrity (to maintain data consistency).

In providing the Services, Avanti shall fulfil all obligations to customers and Service Providers under the terms of the agreements entered into with such parties, in particular in respect of fault reporting and technical support, notification of any connectivity loss, achievement of repair times and the availability of a complaints procedure which informs all customers or Service Providers of their right to refer their complaint to CISAS for resolution. For the avoidance of doubt the Scottish Government will not be involved in the escalation or resolution of any customer or Service Provider complaints with Avanti.

Residential Retail Broadband Services

Avanti will offer its following range of standard connectivity products to residential customers:

· Home 500S is a connection to the internet with a maximum data transfer download limit of 512 kilobits per second. This service has an acceptable use throughput limit of 5 GBytes per month.

· Home 1000 is a connection to the internet with a maximum data transfer download limit of 1024 kilobits per second. This service has an acceptable use throughput limit of 10 GBytes per month.

· Home 2000 is a connection to the internet with a maximum data transfer download limit of 2048 kilobits per. This service has an acceptable use throughput limit of 15 GBytes per month.

· Home 3000 is a connection to the internet with a maximum data transfer download limit of 3072 kilobits per second. This service has an acceptable use throughput limit of 20 GBytes per month.

Avanti will make available basic ISP services with POP3 email and basic hosting services to all residential customers whose equipment meets the following minimum specification: PC with standard 10/100 Ethernet network interface card installed and ready to use. Such services will include:

· Encryption for wireless networks

· Login with username and password

· 1 email address

· SPAM/Virus protection for inbound and outbound emails (if the customer chooses to use a third party email provider, spam filter and antivirus provision falls within the responsibility of the third party email provider);

· Webmail access for email (http://mail.ambamail.com);

· 1 public/ static IP address per CPE;

· Hosting for static web pages (no scripting support). Web space per user is 20MB (http://www.ambamail.com/username)

· a welcome CD with software and support tools that are useful for running and maintaining the service.

Business Retail Broadband Services

Avanti will offer its following range of standard connectivity products to all Business Users:

· Pro 500S is a connection to the internet with a maximum data transfer download limit of 512 kilobits per second. This service has an acceptable use throughput limit of 25 GBytes per month.

· Pro 1000 is a connection to the internet with a maximum data transfer download limit of 1024 kilobits per second. This service has an acceptable use throughput limit of 25 GBytes per month.

· Pro 2000 is a connection to the internet with a maximum data transfer download limit of 2048 kilobits per second. This service has an acceptable use throughput limit of 25 GBytes per month.

· Pro 3000 is a connection to the internet with a maximum data transfer download limit of 3072 kilobits per second. This service has an acceptable use throughput limit of 25 GBytes per month.

Avanti will make available basic ISP services with POP3 email and basic hosting services to all Business customers whose equipment meets the following minimum specification: PC with standard 10/100 Ethernet network interface card installed and ready to use. Such services will include:

· Encryption for wireless networks

· Login with username and password

· 5 email addresses.

· SPAM/Virus protection for inbound and outbound emails (if the customer chooses a third party email provider, spam filter and antivirus provision falls within the responsibility of the third party email provider);

· Webmail access for email (http://mail.ambamail.com);

· 1 public/ static IP address per CPE;

· Hosting for static web pages (no scripting support). Web space per user is 20MB (http://www.ambamail.com/username)

· a welcome CD with software and support tools that are useful for running and maintaining the service.

Service Contract for Broadband services

· Avanti will deliver broadband services via its own ISP operations irrespective of whether other ISPs make use of the wholesale facility.

· Avanti shall contract with customers on the terms and conditions provided, together with the acceptable use policy.

· Avanti shall contract with customers for a minimum contract period of 12 months. The contract with the customer shall enable customers to cancel broadband services following the completion of the initial 12 month term by providing one month's notice in writing.

· Should a customer move house a de-installation and reinstallation fee may be charged by Avanti at its discretion.

· In respect of any agreements entered into between Avanti and an customer, where the Order Form for such broadband services was submitted to Avanti after 30 April 2009, Avanti will also enable such additional users who could, with the installation of a receiver box or equivalent device, use the infrastructure put in place for other customers for the purpose of securing broadband services using Solutions B, C1 or C2, to do so on terms (save for the terms as to installation of a receiver box or equivalent device where the installation price would be no more than the prevailing public tariff available on Avanti's website) no less favourable than the terms on which broadband services are provided to other customers.

Wholesale Services

Avanti will ensure that the wholesale services are available to Service Providers on non-discriminatory terms and in line with its standard terms and conditions.

Avanti will not do anything to detract or otherwise discourage Service Providers from using the wholesale services.

Avanti will contract with Service Providers on terms and conditions no less favourable that those contained in its standard terms and conditions for the provision of similar wholesale services. This will include the provision of a service level agreement containing service level guarantees no less favourable than those in any standard agreements for similar services.

5. Pricing

Initial pricing for broadband services to be delivered by Avanti for the first 3 years of the contract.

Prices payable by the customer will be will be fixed for a period of 3 years from the date of commencement of their agreement with Avanti. Thereafter price increases shall be no more than the percentage increase in the Consumer Price Index in the period of 12 months preceding the price increase.

For the avoidance of doubt, the connection fee includes provision of the required CPE and its installation. Avanti will ensure pricing for the Broadband services is published at all times on its website ( http://www.avantiplc.com/scotland/service_descriptions.htm) in a location and position that provides easy access for customers.

Avanti shall include wording in its agreements with customers to state that all payments by customers shall be made by direct debit collection on a monthly basis, subject to payments also being accepted by cheque or bank transfer at Avanti's discretion.

6. T echnology Description

In providing the Services Avanti shall use one of the following technology options:

Solution A - Direct Satellite

Service will be provided using a two way VSAT Hub network connected to a two way Satellite Interactive Terminal ("SIT") installed at the customer's premises. The SIT shall be compliant with the Digital Video Broadcasting - Return Channel via Satellite (DVB-RCS). The signal is received and transmitted using a satellite dish fitted with an outdoor transceiver system. The SIT requires mains power and therefore requires to be sited indoors at the customer's premises. In most areas of Scotland a 90cm dish antenna will be utilized. In certain areas towards the north and west, 1.2m dish antenna may be utilized. Dishes can be mounted on a variety of surfaces, including a roof, wall or floor. Avanti will ensure that all guidelines regarding planning and location of the systems are adhered to.

Solution B - Shared WiFi

Service will be provided using 802.11a/b/g licensed and unlicensed spectrum (5.8Ghz and where necessary 2.4 GHz) via central wireless points of presence. Each customer receiving their broadband service via this technology will connect to the WiFi signal via an external wireless router. Avanti will be responsible for the correct installation of the external wireless router, which will be directed towards the antenna of the base station. The central base station will be equipped with an omni-directional or directional antenna and connected to a two way satellite backhaul system, similar to the Direct Satellite system, described at Section 1.1 above. The external wireless router will be located outdoors using temporary fixings and will be positioned in line to achieve the highest possible signal strength from the local aerial. Long cable lengths of up to 100m will be used to ensure that the broadband service is cabled to the best location within the customer's premises to meet the requirements of the customer.

Solution C1 - Radio Wireless with xDSL terrestrial backhaul

Service will be provided using 5.8Ghz licensed spectrum via large radio wireless masts erected at the best location to service the highest number of users possible. Each customer receiving their broadband service via this technology connects to the wireless signal via an external wireless router. Avanti will be responsible for the correct installation of the external wireless router which will be directed towards the antenna of the base station located on the radio wireless mast. The base station will be equipped with one or more omni or sectoral antennae and connected to an xDSL tail circuit. The external wireless router will be located outdoors using temporary fixings and will be positioned in line to achieve the highest possible signal strength from the local aerial. Long cable lengths of up to 100m will be used to ensure that the broadband service is cabled to the best location within the customer's premises to meet the requirements of the customer.

Solution C2 - Radio Wireless with two way satellite backhaul

Services will be provided using 5.8Ghz licensed spectrum via large radio wireless masts erected at the best location to service the highest number of users possible. Each customer receiving their broadband service via this technology connects to the wireless signal via an external wireless router. Avanti will be responsible for the correct installation of the external wireless router, which will be directed towards the antenna of the base station located on the radio wireless mast. The base station will be equipped with one or more omni or sectoral antennae and connected to a two way satellite backhaul system, similar to the Direct Satellite system, described at Section 1.1 above. The external wireless router will be located outdoors using temporary fixings and will be positioned in line to achieve the highest possible signal strength from the local aerial. Long cable lengths of up to 100m can be used to ensure that the broadband service is cabled to the best location within the customer's premises to meet the requirements of the customer.

Customer Equipment In order to provide the services to customers, Avanti will :

· Ensure that the equipment used can be connected to each customer's personal computer and/or network via its Ethernet port (RJ45 connector);

· Install an Ethernet cable to the location of the computer or router inside the customer's premises; and

· provide a welcome pack to each customer which will contain sufficient information to explain, in simple terms to the customer, how the settings in any standard software packages, such as Internet Explorer and Outlook, should be configured to utilize them in accordance with the broadband service. Such a welcome pack will also contain information explaining to the customer the use of the various hardware components utilized in the provision of broadband.

· Following installation of the broadband service at the customer's premises, Avanti shall ensure that each customer completes an acceptance certificate, accepting that the broadband service is operational. Copies of these acceptance certificates will be made available to the Scottish Government as part of the monthly reports.

Technology Choice In deciding which of the technology solutions detailed above to use in providing a broadband service to each customer, Avanti shall follow the following process:

· Avanti shall complete the Marketing and Communications Plan (see below) for the relevant group of customers. This takes a minimum period of six weeks from dispatch of the initial marketing packs;

· Following the marketing campaign, Avanti shall examine the number and distribution of the registrants that have completed contracts and become customers.

· Larger Clusterable Number of customers

Where there are greater than 30 customers accessible to a radio wireless network, then solution C1 or C2 (described above) will be implemented. Such areas will be identified first with GIS and RF propagation tool analysis. Desk and site surveys will be required in order to determine actual suitability for a larger radio wireless network installation and to determine location for mast and access point location. It should be noted that wireless propagation is limited by physical obstacles (mountains, hills, trees, built environment) to differing levels, water and the available mast sites.

To select between Solution C1 and Solution C2, the proximity and capability of the local telephone exchange will determine whether C1 or C2 can be implemented.

Should survey results of the local terrain mean that the proposed radio wireless network is not technically feasible, Avanti will split the cluster down to smaller groups and evaluate each of these for Solution B.

· Small Clusterable Number of customers within max. 3km of each other

Where there are greater than 4 and less than 30 customers accessible to a Wi-Fi network, then Solution B will be implemented. Surveys of these areas will be used to establish actual locations, local clutter and potential host sites for the Wireless Point of Presence (WiPoP) equipment required to distribute the signal around the cluster.

If Avanti considers that Solution B would be inappropriate due to factors including, but not limited to, landlord consents, terrestrial building, trees or other obstacles or interference, then Solution A may be offered to the potential customers as an alternative.

· Isolated users

For those potential customers who are deemed via initial desk top survey and mapping to be either too remote to other customers to be grouped together in an small cluster or physically unable to receive a Wi-Fi or wireless signal due to trees, buildings or other obstacles on the ground, a Direct Satellite system, as described in Solution A above, will be deployed.

Hylas Transition Programme

Avanti anticipates that in late 2009, it will migrate to the HYLAS satellite those services which are provided utilising the Intelsat 903. During the initial months following the launch of the HYLAS satellite, and to ensure no downtime to existing customers, Avanti will ensure that Broadband services are provided using both the HYLAS satellite and Intelsat 903. Prior to Avanti ceasing to use the Intelsat 903 services when providing the broadband services, Avanti will carry out all necessary tests to ensure that provision of the broadband services to all customers have not been adversely affected by the service migration.

7. Sales and Marketing Services

Contact Actions

The contact actions are direct marketing campaigns to generate awareness of the availability of the services and stimulate registrants in Annex F to become customers. The mail campaign will be supported by email where possible and further marketing follow up contact will be undertaken by the sales and marketing team.

The Scottish Government will support Avanti, ensuring that local communications and PR messages are aligned to maximize the success of the project.

There will be four key contact actions, detailed below, for each entry in the database of names (Annex F), split into Batches, for efficient use of administrative and engineering resources. The key contact actions are as follows:

Action 1 - Initial Package

This will be sent by post to each entry in the database of names at the appropriate time in line with the timetable below. Each package will contain:

· Introductory letter

· Offer summary & Service order form

· Frequently Asked Questions (FAQ) which will include details of the required customer connection equipment;

· Terms and Conditions & Acceptable Use Policy

Action 2 - Reminder Letter

If no response is received from that address in 10 Working Days, a further follow-up letter will be sent repeating the main sales messages, the offer and how to sign up.

Action 3 - Evening Telesales call

If no response is received after one month, evening (6-9pm) weekday telesales calls will be made. Calls will be attempted to all addresses over a period of 15 Working days, after which the Action will be considered to be complete, even if a response has not been achieved from all addresses.

Action 4 - Final Opportunity

All names in the Batch that have not become customers will be contacted a final time by letter before the end of the project.

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