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NLS: That All May Read

Current Strategic Business Plan for the Implementation of Digital Systems
December 2003

Executive Summary  ---  Executive Council

Section 1: Introduction and Background

Section 2: Proposed System Operations

Section 3: Costs for proposed System

Section 4: Transition Plan

Appendices

Executive Summary

This document presents a current strategic business plan for the implementation of digital systems and services for the free national library program operated by the National Library Service for the Blind and Physically Handicapped, Library of Congress (NLS), its network of cooperating regional and local libraries, and the United States Postal Service (USPS). The program was established in 1931 and is funded annually by Congress (see appendix 1). While there are still several important "unknowns" at play that will determine the technological and economic feasibility of implementation for alternative digital systems-unknowns that will be addressed and answered in several future studies-this document provides the details of a comprehensive strategic plan to facilitate the conversion of the program to digital technologies. The plan will be updated and refined as supporting future studies are completed.

While analog cassette technology has been the backbone of the program for many years, it is now outdated in several respects and is nearing the end of its useful life. Compared to the cassette-based system, digital audio technology offers significant improvements to patrons of the program, network libraries, and NLS. NLS has therefore determined to implement digital audio technology as the framework of the future system. Following a decade and more of research and the establishment of solid technical foundations, the actual transition to patron use of digital materials is expected to begin in four years and require approximately five years to complete.

NLS anticipates that, ultimately, most patrons of the program will download digital reading materials via the Internet using a variety of broadband channels, and store and read books and magazines on portable playback machines designed specifically for use with such a delivery system. However, several major technological and economic impediments related to the provision of broadband Internet access to patrons of the program are expected to continue for some time. Therefore, NLS has decided that reliance on such a delivery system must be postponed until technological advances make it economically feasible.

The plan for the medium-term implementation of a digital system will, therefore, require the mailing of a physical object to patrons, which they will load and play in playback machines; in this regard this plan shares some features with the distribution system presently employed for cassettes. NLS has investigated three types of digital media: (1) CD-ROM; (2) magnetic hard drive; and (3) flash memory. Based upon an evaluation of the relevant technological and economic characteristics of these three media types taken in tandem with the operational environment of the program, NLS has concluded that at this time a flash memory-based delivery system is the best alternative, with one major proviso: the wholesale unit price of flash memory must decline further before implementation is economically feasible. NLS is confident that this economic threshold will be reached by FY 2008. While CD-ROM and magnetic hard-drive technologies are both more mature than flash memory, neither would support a book and machine system sufficiently reliable for the application; both books and machines would be likely to sustain damage in normal use and machines in transit though the mails because of their inherent physical characteristics (the machines have precision parts built to fine tolerances and are extremely sensitive to shock, and CDs are inherently delicate). These technological Achilles heels would result in higher media and machine failure rates than with flash memory, lead to poorer service to patrons and extra workloads for network libraries, and necessitate relatively high book-replacement, machine-replacement, and machine-repair costs to NLS.

NLS envisions numerous advantages, relative to the present system, from the implementation of a flash memory-based system. Audio reproduction quality is superior in flash memory, which will provide better sound quality in playback; flash memory has higher storage densities and capacities than cassettes, which will provide better portability for patrons; there will be fewer items for patrons to keep track of (generally one cartridge instead of several cassettes), and there will be no need for patrons to flip a switch or turn the cartridge over during play. Flash memory will require less storage space for collections at network libraries. The memory cards are long-lived and can be reused many times without loss of quality. Playback devices will have smaller physical size and weight and better portability than cassette players and require less storage space in network libraries. The machines will be more reliable than cassette machines, resulting in fewer malfunctions and fewer repairs by network agencies and NLS contractors; they will be easier and less expensive to maintain, requiring simpler repairs by network agencies, volunteers, and NLS contractors; repair parts storage requirements will be less, and parts expenditures reduced; and the playback devices overall are expected to be less expensive, enabling savings to be redirected to other facets of the program's operation.

The proposed structure of the future system will be based on the "Specifications for the Digital Talking Book," ANSI/NISO Z39.86-2002, which was approved March 6, 2002 (see appendix 3); digital books or machines, for any delivery system, must be able to process files based on this standard. Because development of the digital collection is independent of the medium to be employed in the delivery system, and with the digital talking-book standard in place, NLS has been developing its digital collection since FY 2002. NLS will produce all recorded book titles in digital format beginning in FY 2004, and has goals to produce 10,000 new titles in digital format by FY 2008, convert another 10,000 existing analog titles to digital format by FY 2008, and continue to produce an average of 2,000 titles per year during FY 2008 and in future years. The medium to be used for digital books is expected to be a high-density 128 MB flash memory cartridge, or card. A single card would be capable of holding the digital files for an average NLS book (approximately 12 hours), having been compressed using the AACPlus algorithm. The card would be physically larger than a credit card, but smaller than a cassette, and would be labeled in large print and braille. The present cost of such a card is approximately $25-$45 and will have to decline to approximately $10 to be economically feasible; however, NLS is confident that price reduction trends will continue and that this level will be reached by FY 2008 (see appendix 6).

NLS has determined that a Pareto's Law effect applies to book circulation in the free library program, i.e., the most popular 20 percent of titles constitute 80 percent of total circulation. Given this consideration-taken together with operational, technical, and economic characteristics of a flash memory book storage and distribution system and the traditional responsibilities of the parties who operate the program-NLS is proposing a "hybrid" business model for future operations to maximize the system's service effectiveness and economic efficiency. In this model, titles expected to be among the most popular 20 percent, hence constituting 80 percent of total circulation, would be mass-produced, allocated, and distributed to network libraries, and then stored in collections and loaned to patrons, much as cassettes are at present. The remaining 80 percent of titles, constituting 20 percent of total circulation, would be duplicated on demand by an NLS contractor operating a highly automated distribution center that would loan books to patrons nationwide. No book collection copies would be stored in the centers; rather, books would be stored on one or several mass-storage (multi-TB) servers located on-site and loaded on to cartridges at high speeds. Network libraries would provide reader advisor services for all titles, so there would be no contact between the storage centers and patrons; libraries would telecommunicate book orders as necessary to the center, which would confirm in the same manner both the issuance and return of books loaned to the libraries' patrons. The centers would reuse the cartridges many times; unneeded book copies in network libraries would be periodically weeded and allocated to other libraries in need of those titles, reused for mass-production of books, or reused for duplication-on-demand by the centers.

NLS expects to have 50,000 digital playback machines available for distribution by FY 2008. The plan is to have two types of machines, the predominant type intended for straight "linear" reading and the other with more-complex features. Many aspects of machine operations in the future system will remain unchanged, including distribution of machines from manufacturers to network libraries; allocation of production based upon readership; storage, lending, and control of machines by network libraries; management and procurement of repair parts by NLS; and the proportion of attrition associated with lost and stolen machines. Several aspects of machine operations will change, however, including lower disposal rates thanks to higher reliability (including better spill resistance); lower failure frequency and repair rates because of higher design reliability; lower repair costs because of better maintainability design; and relatively less reliance on volunteer repair and more on commercial repair.

Prior to distribution of the first digital talking books (DTBs), NLS will instruct network libraries to remove from their collections, if they desire, their entire rigid disk (RD) collections, to be disposed of or transferred to the NLS multistate centers, which will meet residual RD circulation requirements. Space now used for RD storage will be available for digital book storage and other uses. Cassette books and machines will continue to be the backbone of the system through approximately FY 2007, but in the five years between FY 2008 and FY 2012, digital books and machines will effectively replace cassette books and machines as the primary technology employed in the system. At some point during this conversion period, it will become too expensive to mass produce cassette books in small quantities, and production will cease. Copies of cassette books will be weeded from the library collections periodically as popularity wanes. The disposition of the cassette machine inventory will be dictated by the course followed by cassette book collections and demand. The modus operandi to be employed for digital magazine storage and distribution is yet to be determined; a disposable flash memory-based magazine will probably not be economically feasible. Two alternatives under consideration are returnable magazines and a delayed digital conversion of the magazine title list. It is likely that magazines will be produced on disposable cassettes well beyond the end of the book and machine conversion period.

In section 3 of this document, the estimated major NLS-incurred costs of future book and machine operations for the hybrid business model are developed and compared with two other business models utilizing flash memory media and with the costs of current operations; these estimates and comparisons are shown in exhibit 3-1 of this document. The alternative business models considered for future operations are, first, one in which all digital book titles are mass-produced and distributed to network libraries, and, second, one in which centralized circulation is provided by NLS. The major functions of book and machine mass production are developed for both current and proposed operations, and the costs for the NLS book distribution center(s) are also developed for the proposed operations; the levels of demand for books and machines in the future system are assumed to be the same as for the current system. Assumed values for all factors influencing costs are provided. A total of $23,148,000 per year of NLS-incurred costs is estimated as the baseline average cost for audio books and machines for the current system; the hybrid model is estimated to require a $3,121,150 initial investment (amortized over 20 years) and $22,528,000 per year; the all-titles-mass-produced model requires no initial investment and $30,280,000 per year; and the all duplicated-on-demand model requires $15,606,000 initial investment (amortized over 20 years) and $38,524,000 per year. Hence the estimated costs for the hybrid model compare very favorably with the costs for current operations, while the all-titles-mass-produced model is approximately 30 percent higher, and the all duplicated-on-demand model is about 65 percent higher. It was determined that total NLS costs are very sensitive to the proportion of network circulation handled by the centers, the unit cost of distribution at the centers, and the unit price of flash memory, while they are not relatively sensitive to cartridge loss rate and book turnaround time, assuming that the known ranges for these variables are correct.

The estimated cost impact upon network libraries of the implementation of the hybrid model is shown in exhibit 3-2 of the document, based upon assumed changes in cost components and FY 2002 NLS Life Cycle Cost model baseline values. Estimated FY 2002 baseline network costs of approximately $61,328,000 would be reduced by approximately $9,173,000, or 15 percent, by the implementation of the hybrid model. More than half the total savings would be realized in facility and occupancy cost reductions because RD collections would be removed, recorded cassette (RC) collections would be weeded down, digital books and their containers would be physically smaller, only 20 percent of digital book titles would be stored in library collections, and random storage of collections would (possibly) be utilized. The balance of the savings are attributable to the assumption by NLS centers of 20 percent of the digital book distribution workload (that has been traditionally performed by network libraries) and to the higher reliability of digital books and machines relative to the current system. USPS-incurred costs are not considered in the analysis because the USPS is indifferent to the delivery system employed as long as materials transported though the mails are packaged, addressed, and identified in accordance with specified postal standards. Appendix 8 of this document presents a preliminary projection of long-term funding requests by NLS for implementation of the digital system. NLS intends to pay for modifications of the READS circulation system, but network libraries must pay for modifications of other information systems used that are necessary to support future operations. If the unit price of circulation from the centers is significantly higher than $1 per copy, the possibility of network libraries reimbursing the centers may have to be explored.

There is acknowledged pressure at both federal and state levels to facilitate more efficient operations through the implementation of new technologies. This pressure is sometimes answered by "quick solutions" with the primary objective of reducing short-term operating costs. NLS has been asked why the implementation of digital systems is not proceeding more rapidly. The answer to this question is twofold: first, the transition is too complex to rush and requires careful planning and execution; second, the unit price of media in the flash memory-based system must decline. Therefore, the fundamental transition strategy is to await further price reductions and, in the interim, execute all other necessary planning and implementation steps.

Decisions made in the medium term do not preclude the implementation of other alternatives in the future as the fluid digital environment evolves and new or significantly altered technological options become available.

Appendix 9 of this document contains a Gantt chart of the initial transition plan to effect implementation of the proposed flash memory-based hybrid model system, which shows the major transition steps and their approximate timing. Some of the first steps have already been taken. The major conversion steps will occur beginning in FY 2008 and continue through FY 2012, and the last steps will continue beyond FY 2012. The major steps in chronological order of their commencement are: (1) development of digital book title master collection-conversion of 10,000 existing titles and production of 10,000 new titles by FY 2008; (2) user survey-assess program patron characteristics; (3) player transition study--determine the appropriate long-term phase-out strategy for RCs/Cassette Book Machines (CBMs) and phase-in of DTBs/digital talking book machines (DTBMs); (4) pilot test of Internet delivery, beginning with magazines-learn lessons for the future system; (5) distribution media and system study-evaluate alternative media and select the best for implementation; (6) DTB player and media design contract-single contract to develop complete and coherent digital book and machine system for selected medium; (7) DTB container design contract-design of the digital book mailing and storage container; (8) distribution system design and transition planning-evaluate alternative distribution systems and develop detailed operational specifications and cost estimates for the selected system; (9) RD phase-out-remove RD collections from network libraries, dispose of some, transfer others to multistate centers; (10) circulation systems redesign-modify existing library circulation information systems to support future operations; (11) circulation systems implementation-install, test and implement modified information systems; (12) distribution system implementation-commence operations of the future distribution system; (13) DTBM production-mass produce digital playback machines; (14) reduction of CBM inventory-reduce and phase out cassette book machines; (15) medium production-mass produce cartridges specially modified for program; (16) DTB container production-mass produce digital book storage and mailing containers; (17) DTB mass production-mass produce digital books; (18) RC mass production phase-out-reduce and phase out mass production of cassette books; (19) weeding of RC collection-reduce and phase-out cassette book collections in network libraries; and (20) weeding of DTB collection-weed digital books in library collections and transfer to other libraries or reuse for mass production or for duplication on demand.

Executive Council: Digital Audio Development Project

Brad Kormann, Chief, Materials Development Division


John Bryant, Head, Production Control Section

John Cookson, Head, Engineering Section

Judith Dixon, Consumer Relations Officer

Robert Fistick, Head, Publications and Media Section

Thomas Martin, Assistant Chief, Network Divsion

Robert McDermott, Automation Officer

Michael Moodie, Research and Development Officer

Stephen Prine, Head, Network Services Section

Donald Smith, Head, Quality Assurance Section


Frank Kurt Cylke, Director

Jean Moss, Digital Planning Coordinator


Jerome L. Ducrest, Expert Consultant

Donald L. Pieper, Expert Consultant

Section 1: Introduction and Background

A free national library program for persons who are unable to read or use standard printed materials as a result of temporary or permanent visual or physical limitations is operated by the National Library Service for the Blind and Physically Handicapped (NLS), Library of Congress which selects, produces, and distributes books and magazines in braille and recorded formats, and designs and manufactures special playback equipment for use with the audio materials. In fiscal year 2002, the readership totaled 693,151, of which 660,102 were audio users and 33,049 read braille. NLS manufactures approximately 42,000 cassette players annually and holds an inventory of 712,890 players, of which 513,253 are assigned to program users.

NLS produced 2,059 audio books and 627 braille books in fiscal year 2003, and circulated 45 recorded and 33 braille magazines to subscribers. The total collection of recorded and embossed books available to program users exceeds 310,000 titles.

NLS distributes the reading materials and playback machines to a nationwide network of 134 cooperating regional and local libraries, which in turn store and distribute the books and players to eligible borrowers. Circulation of audio and braille materials (books and magazines) totaled 23,074,033 in fiscal year 2002. The reading materials and playback equipment are sent to borrowers and returned to libraries through the United States Postal Service (USPS) using postage-free mail, the cost of which is covered by a congressional appropriation. Appendix 1 contains the enabling legislation for the operation of the free national library program, Public Law 89-522.

This document presents a preliminary strategic business plan for the implementation of digital systems for the free national library program. It is not a final plan, because there are still several very important "unknowns" at this writing which will dictate certain aspects of the implementation. These unknowns, however, will be addressed and answered in several comprehensive planning studies to be conducted in the near future; these will in turn set the specific course for the implementation.

Therefore, this business plan will be revised several times during the next few years as supporting future studies are completed and the best alternatives for system implementation are selected and developed. Nevertheless, this document of December 2003 constitutes the basis of a comprehensive strategic planning process to facilitate the conversion of the program to digital technology and is a part of the Library of Congress FY 2004 - FY 2008 Strategic Plan.

Current system and situation

Cassette book (RC) and cassette book machine (CBM) analog audio technology is the backbone of the current system. This technology has provided several service improvements relative to its predecessor technology, i.e., talking book/rigid disk (TB/RD) and talking book machine (TBM) technologies. RC and CBM technology have provided reliable and cost-efficient media for books and magazines since the 1970s.

However, RC and CBM technologies are now outdated in several respects and nearing the end of their useful life in the program. Because of technological advances of which they are aware, patrons have heightened expectations of service improvement.

Digital systems

NLS has begun to implement the use of digital audio technology as the backbone of the future system for the program. Improvements associated with digital technology will be realized by patrons of the program, the libraries that provide service to the patrons, and NLS. The program will continue to provide RCs and CBMs to patrons while the transition is under way, but digital talking book (DTB) and digital talking book machine (DTBM) technology will ultimately replace RC technology just as RC technology replaced TB/RD technology. The transition to use of the new technology by patrons is expected to begin in approximately four years and should require approximately five years to complete.

NLS has identified and documented the fundamental requirements of any future system based upon digital technology, regardless of the specific format and delivery characteristics of that technology. These requirements were developed by the Digital Long-Term Planning Group, which includes NLS and network staff, Chief Officers of State Library Agencies (COSLA) members, and consumer advocacy representatives. "Digital Talking Books Program - Key Requirements and Assumptions" (appendix 2) is a comprehensive summary of the general requirements for any digital system to be implemented in the future.

Long-term outlook

NLS anticipates that, ultimately, most patrons of the program will download digital reading materials through a variety of broadband channels, i.e., several devices and/or high-speed transmission technologies that facilitate the rapid transfer of large quantities of data. Such channels might include digital subscriber line (DSL), cable modem (CM), wireless access, satellite access, fiber-to-the-home (FTTH) and power line broadband technologies, to list those channels currently available or under development. In such systems, reading materials will be downloaded to portable playback machines with memory capacity sufficient for the storage and accessing of multiple books. Such delivery systems will use a fundamentally different business model from that which is currently employed, and NLS envisions such a model and systems in the long-term plan.

However, there are currently several serious impediments to the implementation of the long-term plan.

Many patrons do not have Internet access of any type, which would be required for the long-term plan, and for which patrons would have to pay an Internet Service Provider (ISP);

For those patrons who have Internet access, it is almost always on very slow telephone lines that do not facilitate the high data-transmission rates required for the effective transfer of a DTB (approximately 128 MB, compressed). Only 18% of US residents had broadband access as of February 2003, and the percentage of program patrons with broadband access is probably well below that figure;

Access to broadband channels is relatively expensive and would have to be paid for by patrons, sometimes in addition to their payments to the ISPs;

Patrons would require additional equipment, other than DTBMs, in order to connect to and download from the Internet. Again, this expense would have to be borne by the patrons; and

There is excessive complexity associated with the user interface, whereby the patron must first download a book from the provider (NLS or library) to a personal computer (PC), and then transfer the data from the PC to the DTBM. This process would be too complicated for many users.

NLS even considered using a cable channel to distribute reading materials. However, many patrons lack access to cable, and serious constraints exist vis-a-vis current cable technology and the cable industry, associated with the number of "head ends" required to hold the data that would be distributed to users of the channel. In order to provide national coverage, the delivery system would require that as many as 700 sites be loaded with the NLS book and magazine collection data, which would be prohibitively expensive. NLS met with cable industry representatives to discuss the possibilities, constraints, and impediments associated with effective implementation of such a system and concluded that it is not feasible, now or in the near future.

Therefore, NLS has decided that the implementation of the long-term plan must be postponed until technological advances make such a delivery system feasible from both technical and economic perspectives. This does not mean that NLS will not begin "secondary channel" delivery of reading materials through the Internet, but such delivery will not constitute the primary system implemented for the medium-term plan.

Alternative technologies considered for medium-term system

Given the above limitations associated with implementation of the long-term plan, the medium-term plan for the implementation of a digital system will require the mailing to patrons of a physical object that they will load and play in playback machines. In this regard, the basic business model for the medium-term plan shares some features with the current system. NLS has considered three types of digital media for the distribution system for the medium-term plan: (1) CD-ROM; (2) magnetic hard drive; and (3) flash memory.

CD-ROM-based system

The CD-ROM is a mature data storage medium that would use high-density memory on optical disks to hold reading materials. Books would be prerecorded on CDs, mailed to patrons in containers, and returned in the same manner. They would be played on CD players specially-modified for an enhanced user-interface and for better-than-consumer-average reliability.

There would be several advantages associated with the use of a CD-based system:

However, the following disadvantages would be associated with the use of a CD-based system:

In a system where CDs were duplicated on demand and sent to patrons without expectation of return, the first (to some extent) and the last of the above disadvantages would disappear, but the others would remain. In addition, such a system could only be implemented reasonably in an environment where highly automated equipment and the technical staff to support it were present. Few network libraries could provide such an environment.

Magnetic hard-drive-based system

The magnetic hard drive is also a mature data storage medium. It would use a high-density internal magnetic hard disk to hold reading materials. Multiple book titles would be loaded onto playback machines at network libraries, and the loaded machines would be mailed to patrons in special mailing containers. Machines needing reloading of reading materials or repair would be returned by patrons to network libraries. The machines would have an enhanced user-interface and better-than-consumer-average reliability.

There would be several advantages associated with the use of a magnetic hard-drive-based system:

However, there would be the following disadvantages associated with the use of a magnetic hard-drive-based system:

Flash-memory-based system

Flash memory is a middle-aged and evolving data storage media that would use high-density solid-state memory cartridges to hold reading materials. Books would be both prerecorded on memory cartridges and, depending upon the specifics of the operation implemented, recorded on demand, and mailed to patrons in containers and returned in the same manner. Books would be played on playback machines specially designed for flash memory.

There would be a number of advantages associated with the use of a flash-memory-based system:

However, there would be the following disadvantages associated with the use of a flash-memory-based system:

Medium-term plan

Based upon an evaluation of all the characteristics of the three systems discussed above, NLS intends to implement a flash-memory-based DTB and DTBM system for the medium term. This decision is not cast in concrete; Section 4 of this document, the Transition Plan, cites several future studies that will be conducted to evaluate alternative routes that the medium-term system could follow. However, based upon what is currently known, it appears that the flash-memory-based system is the best alternative for implementation after the wholesale unit price of 128 MB cartridges declines to a level which makes it economically feasible to begin mass production of books.

NLS envisions the advantages cited below, relative to the present RC/CBM-based system, that would be associated with the implementation of a flash-memory-based system:

Decisions made in the medium term do not preclude the implementation of other alternatives in the future as the fluid digital environment evolves and new or significantly altered technological options become available.

Section 2: Proposed System Operations

Preliminary plans for future operations

As mentioned in the previous section, there are several important "unknowns" associated with the implementation of digital systems that will be addressed in and answered by several comprehensive studies planned over the next three years. These studies will consider and evaluate several feasible alternatives for implementation of a digital system, and will select and develop those alternatives that are best, all things considered. Therefore, some aspects of the future system described in this section cannot be specified with great precision, nor can it be assumed with complete certainty that their eventual implementation will be in fact accomplished.

Nevertheless, this section describes the operations of the digital system for the medium-term plan as they are likely to develop. For this discussion, a "steady-state operation" is assumed, in which the conversion to the digital system is complete, DTBs and DTBMs are the primary technology employed by the program (regardless of whether, and to what degree, RC and CBM technology are supported after the conversion), and all patrons have DTBMs. The Transition Plan in section 4 of this document addresses the steps that must be performed prior to and during the conversion period.

Digital talking book standard

The foundation of any future system using digital reading materials will be the established standard, or specification, for DTBs. Any and all DTBs, regardless of the particular media and delivery methods used, must be structured and contain files in compliance with the standard. Furthermore, any DTBMs designed and built must be able to process files using this standard.

Development of the standard was initiated and managed by NLS under the umbrella of the National Information Standards Organization (NISO). The standard was approved March 6, 2002, by the American National Standards Institutes (ANSI). It is formally known as ANSI/NISO Z39.86-2002, "Specifications for the Digital Talking Book," and is also referred to as "DAISY 3," "NISO DTB standard," and "Z39.86." Appendix 3 contains the introductory pages and the overview section of this specification.

DTB collections

Because the DTB standard has already been established, collection development can proceed. Because the development of digital title masters is neither media- nor delivery method-dependent, NLS has already started building the DTB collection. This collection development is exclusively for digital title masters, not mass-produced copies, and this will remain the case for several years. The mass production of flash-memory-based copies must await further price reductions, probably until FY 2007 or FY 2008, in order to become economically feasible.

NLS has set an objective of 20,000 DTBs ready for distribution by FY 2008. These will come from two sources: (1) titles produced from FY 2002 - FY 2008 directly in digital format; and (2) other titles produced prior to FY 2004 which will be converted to digital format from an analog format. Appendix 4 contains a bar chart depicting the planned development of the DTB title master collection for the period FY 2004 - FY 2007 from both of these sources.

Approximately 10,000 new titles will be produced in digital format during the FY 2004 - FY 2008 period (i.e., roughly 2,000 titles per year for five years). As of FY 2004, all book titles are produced in digital format and will continue to be. During FY 2002, 10% of titles were produced in digital format, increasing to 50% in FY 2003.

Approximately 10,000 existing titles in analog format, all of which were produced prior to FY 2004, will undergo analog-to-digital conversions. These titles constitute a diverse cross-section of the entire collection produced in analog format, and are not simply the most popular titles. Appendix 5 lists the first 1,000 titles selected for conversion. During the four-year period from FY 2004 - FY 2007, 2,000 - 3,000 titles per year will be converted from analog to digital format.

Beyond FY 2008, NLS expects to produce approximately 2,000 new titles annually in digital format. While NLS also intends to convert additional existing analog titles to digital format beyond the 10,000 titles now targeted for conversion, the extent of additional conversions is currently unknown. It is possible that additional existing analog titles will be converted to digital format on an "as-needed, title-by-title" basis as program-wide demand dictates. It is also possible that ranges of existing titles may be converted.

Medium

The medium to be used for the DTB would be a high-density solid-state flash memory card (or cartridge) containing the data files for the audio book. The card would be played on a DTBM designed specifically for that purpose.

The average NLS book is approximately 12 hours long and consists of approximately 3.8 GB of data when created as a digital master in .wav format. A data compression algorithm known as AACplus would be used to compress the 3.8 GB file to a 128 MB file in order to maximize data storage capacity on a card. This compression technique results in good quality audio reproduction at a data retrieval rate of 24 Kbps.

A high-density 128 MB capacity solid-state memory chip would be used on a single memory card. Therefore, a single card would be capable of holding an NLS book of average length. An estimated 75% of all titles in the NLS book collection would fit on a single memory card. The card would be physically larger than a credit card, but smaller than a cassette.

NLS cost estimates for operation of a flash memory system are based upon an eventual wholesale unit price of approximately $10 per 128 MB memory card; it is, of course, desirable that this unit price decline even further. Based upon information provided by industry representatives and trade publications, it is estimated that the $10 per 128 MB card will be realized by FY 2008. The current price for such a card ranges from $25-$45; however, 10 years ago, in 1993, the wholesale unit price for such capability was $12,000-$15,000. Appendix 6 depicts actual and estimated prices for flash memory for the time period 1997-2008. There may, however, be a minimum unit price level that is asymptotically approached, e.g., $6-$8, as high-density memory chip prices decline even further, because the card also contains other components such as the case and connector whose prices will exhibit little or no decline over the same period.

DTBs that are mass produced may be labeled in braille, large print, and bar-code. DTBs that are produced on demand will be labeled with large print and bar-code, but may or may not be labeled in braille; only 5% of program patrons read braille, and this factor must be weighed against the additional cost of producing the label in braille in the case of on-demand production.

Book storage and distribution

NLS has determined that a phenomenon which occurs in a variety of operations, in multiple industries, also occurs in book circulation in the free national library program. This phenomenon is described by a rule-of-thumb commonly known as "Pareto's Law," or the "80/20" rule. In general, this law states that for a given population of entities associated with a given activity, a distinct minority of the population accounts for a distinct majority of the activity. In most instances, this lop-sided distribution is skewed such that the most active 20% of entities constitute 80%, or approximately 80%, of the total activity. NLS has indeed found that approximately 20% of the recorded book titles account for approximately 80% of the total circulation in the free national library program.

A careful consideration of this characteristic of book circulation in the program in tandem with operational, technical, and economic characteristics of a flash memory-based book storage and distribution system, has led to the conclusion that NLS must leverage such characteristics to maximize service effectiveness and economic efficiency of the future system. This consideration has taken into account the traditional roles and responsibilities of NLS and network agencies in the operation of the program and the estimated component costs of the system as a whole.

NLS believes that the best alternative for implementation of a flash memory-based book storage and distribution system-taking into account all that is presently known-is a "hybrid" operations model. The hybrid model attempts to leverage all relevant factors of the system in order to maximize both service effectiveness and cost efficiency.

Hybrid model - high-circulation titles

High-circulation (or high-velocity) book titles will constitute approximately 20% of existing and future titles. NLS intends to mass-produce DTB copies of these titles and send them to network libraries for storage and circulation in a manner similar to that currently employed for RCs. NLS does not want network libraries in the mass-duplication business, i.e., mass-producing copies of DTBs themselves; because of both technical and economic constraints, most network libraries would be unable or unwilling to assume this role. However, this does not preclude production and duplication of book and periodical titles outside of the NLS collection, or duplication of extra copies of books, as is done with cassettes today.

Mass production. Approximately 1,100 DTB copies would be mass-produced for these highest-circulation titles, i.e., produced in the same quantities as the highest-circulation RC titles at present. The copies would then be automatically allocated to network libraries through a copy-allotment system using network library input, also as at present. The specifics of this copy-allotment system are to be determined with regard to the flexibility, if any, of the specific titles that a given network library will circulate; there is the possibility that something other than a "one title group fits all" policy may be implemented, but it may turn out that such flexibility is not feasible.

Production allocation. Allocated copies of mass-produced DTBs would be shipped from the manufacturer to network libraries in appropriate mailing/storage containers. All DTB copies would have a combination large print and braille label, affixed by the manufacturer in the mass-production process.

Collection storage. DTBs would be stored (probably in their mailing containers) in book ranges in the network libraries configured for the specific geometry of the DTBs and their containers. Copies would be stored and retrieved using either a fixed, or preferably, random storage location scheme supported by bar-coded shelf locations, bar-coded book copies and hand-held RF bar-code scanners. The storage area required in network libraries will be greatly reduced relative to storage requirements for RDs and RCs, primarily because only 20%, not 100%, of the DTB book collection will be stored therein, and because the media and containers will be smaller. Furthermore, these titles are the "fast-movers" and most copies will be checked out to patrons.

Circulation. The network libraries would distribute these high-circulation titles to patrons, the total circulation of which would constitute approximately 80% of total circulation to their patrons; the remaining 20% would be handled by NLS as described below. Network libraries have traditionally handled all circulation of books in the program, except for circulation of those titles provided by NLS multistate centers (MSC). This modus operandi must continue in the future, with only moderate modification, since it is economically feasible for NLS to provide only a small portion of the total circulation, given that it provides all books, magazines, machines and repair parts for the program.

Patron contact. Patrons would return copies of these titles to network libraries after having read them. Replacement of lost copies, if required, would be the responsibility of the libraries. Network libraries would provide reader advisory services for these titles, and perform any follow-up required for overdue books.

Weeding/reuse of copies. Lastly, network libraries would perform periodic weeding of the DTB collection that they manage, and send the excess cartridges to NLS for reuse. Weeding would be performed by the network libraries as demand for titles wanes, even for bestsellers. The unneeded cartridges would then be reused by NLS either for mass-production of new titles, or in the NLS circulation centers as described below.

Hybrid model - low-circulation titles distribution and storage

Low-circulation (or low-velocity) book titles would constitute approximately 80% of existing and future titles, but only 20% of total network circulation. NLS intends to duplicate copies of these titles on demand in NLS contractor-operated distribution centers and distribute them directly to patrons of the program nationwide.

The logic for this modus operandi is that:

  1. network libraries would not have to store copies of titles for 80% of the collection, offering significant reductions in required facility storage space and collection management costs; and
  2. although NLS would assume a greater role in circulation than is currently the case, with a commensurately higher associated cost, it would partially or totally offset these increased operations costs with reduced mass-production costs given both the technical and economic characteristics of a flash memory-based system.

A cost analysis presented in section 3 of this document demonstrates the superiority of this hybrid business model to both a model in which all titles are mass-produced and to another model in which NLS provides all circulation on demand.

The plan is for NLS to house 80% (or possibly 100%, simply to have a complete collection and perhaps to facilitate a flexible arrangement with network libraries concerning which titles are circulated by which party) of DTB title masters in compressed format on a mass-storage (multi-TB) server device in a single contractor-operated distribution center (or possibly two). The contractor that operates the center(s) could be a manufacturer of DTBs (because of similar business resources and abilities), but not necessarily.

Network libraries would continue to provide all reader advisory services to their patrons for all book titles, including the 80% of titles managed by the NLS circulation center. Libraries would send orders (whether originating from patrons as requests for specific titles, or titles generated from a library's profile-select system) for any NLS-managed DTB titles on line to the NLS center, who would circulate the books to the patrons. The NLS center would communicate back to a network library when a copy of a requested title is sent to a patron. Network libraries would be responsible for any follow-up necessary for overdue books.

The circulation provided by the center would constitute approximately 20% of total network circulation, but could conceivably be lower. The operation would probably be highly automated in order to perform the necessary work at low unit cost, which would be necessary in order to make this distribution method economically feasible. A relatively small facility space would be required for such an operation, as explained below.

Beginning with new blank memory cartridges or erased cartridges returned by patrons, the center would load requested book titles onto DTB cards on an on-demand basis from the mass-storage server containing the DTB title collection in compressed format; there would be no collection of copies of DTBs whatsoever in the centers. After loading the data from the server onto a card, the card would be labeled with large print and bar-coded; whether these would be labeled with braille as well will be determined in a distribution study that is planned. Given knowledge of a patron's braille interest, the system could produce braille labels only for those who desire them. The loaded and labeled card would then be inserted into a DTB mailing container and sent to the patron, and the appropriate network library notified.

After reading the DTBs loaned from the NLS center, patrons would return the copies to the center; the center would then send an acknowledgment to the patron's network library that the book had been returned. The memory cards would then probably be erased/cleared and then reloaded for subsequent circulation. In either instance, a given cartridge can be reused thousands of times by the center with no degradation to audio quality. Although network libraries would be responsible for follow-up of overdue books loaned from the center to their patrons, any replacement of lost cartridges, as required by the center, would be the responsibility of NLS.

Digital talking book machines (DTBMs)

NLS intends to have 50,000 DTBMs available and distributed to patrons by FY 2008, which will constitute the initial inventory of the new equipment for the new system. The current plan is to produce two types of players, most of which will be basic "straight linear reading" models, but some of which will have more complex features.

Most major aspects of playback machine operations will remain fundamentally unchanged with the implementation of DTBMs in the future system. Distribution of new DTBM production will be made directly from manufacturers' sites to network libraries via the USPS. Allocations to network libraries will be made based upon recorded book readership. Libraries will loan machines to patrons, who will use them to play reading materials, and who will return them to the loaning library when defective or no longer needed. NLS will determine the machine parts necessary for the performance of ongoing repairs and procure, store, and distribute them to locations where repairs are performed. The attrition associated with lost, stolen, or location unknown (LSU) DTBMs, as a proportion of assigned machine inventory, will probably be approximately the same as it is in the current system.

Four aspects of future playback machine operations, however, will probably be significantly different from current operations. The damaged beyond repair (DBR) rate for DTBMs, as a proportion of assigned machine inventory, will be lower than that for CBMs because of the higher reliability inherent in the fundamental design of the machine (i.e., no electro-mechanical components). Failure frequency, and hence repair rates, as a proportion of assigned machine inventory, will be lower than for CBMs due to a higher reliability design. Repair costs will be lower, on a per machine repaired basis, than in the present system because the DTBM will not contain multiple electromechanical parts. Finally, there will probably be relatively less reliance upon volunteer machine repair support and relatively more reliance upon commercial repair support than at present; this does not preclude volunteers performing certain types of repairs on DTBMs.

Non-digital books and machines

As stated in the beginning of this section, the discussion of proposed future operations based upon flash memory technology assumes a steady-state operation, after the conversion of technologies is completed and the digital system has become the primary delivery channel for reading materials in the program. Network libraries currently store and distribute books from two other media collections-RD and RC.

NLS intends to instruct network libraries to remove from their collections, if they so desire, their entire RD collections prior to the distribution of the first DTB copies. RD copies from these collections will be sent to NLS for final disposition (some to MSCs, some to Landover, Maryland, for disposal). This will make available for DTB storage or other uses facility space now used for RD storage. From that juncture, MSCs will handle all circulation of RD titles.

From the present through FY 2007, RCs and CBMs will continue to be the backbone of the system. Operations during this four-year period will continue generally as they have for the past several years. Beginning in FY 2008, and continuing for approximately five years, DTBs and DTBMs will gradually replace RCs and CBMs as the primary delivery system for the program. Mass-production quantities of DTBs will gradually be increased, and those for RCs gradually reduced. Economic necessity may dictate that not all titles continue to be mass-produced in RC format, but rather approximately 25% of what are anticipated to be the most popular titles. At some point before the end of this conversion period, probably by FY 2011, it will no longer be economically feasible to produce new titles on RC because the number of copies per title required will fall so low that the per copy cost will become prohibitively expensive. At that juncture, new title production on RC will cease. As RCs are used less and less, libraries will weed down the number of copies per title on RC, and probably remove all RC copies of any titles later produced on DTB (10,000 at a minimum).

The disposition of the CBM inventories will be driven by the evolutionary course that RC collections and circulation follow. Any patrons who want to keep CBMs after the conversion to digital is complete may be able to, given the size of the current and projected CBM inventories, and the projected DTBM inventories. However, the specifics of this conversion and residual system require further analysis which will be addressed in a machine transition study.

Magazines

NLS currently provides direct circulation of magazines on cassette to patrons of the free library program, which is fundamentally different from the delivery mode used to provide books. For the medium-term plan, NLS will continue to do the same with magazines after the conversion to digital media for books.

The current media for magazine distribution are disposable (one-way) cassettes. However, flash memory cards would be too expensive, even after having reached the point whereby the wholesale unit price is low enough for book mass production and mass duplication-on-demand, to be used on a throwaway basis. While it is possible that the unit price of flash memory may eventually decline to a level whereby a throwaway magazine would be economically feasible, the assumption for the future system is that it would not. Therefore, another approach must be found.

Two approaches are being initially considered. The first involves treating flash memory-based magazines like books, i.e., patrons would return them rather than disposing of them after use. The returned cartridges would then be reused (for magazines, mass-produced DTBs, or duplicated-on-demand DTBs).

The second approach takes into account the fact that only approximately 10% of recorded book patrons nationwide subscribe to any magazines (whether one or more). A feasible alternative may therefore be, until and unless the unit price of flash memory declines enough to facilitate a throwaway magazine, to continue providing magazines on throwaway cassettes and to continue providing CBM support to this 10% of patrons. This delayed-conversion approach was used in the past, when flexible disk (FD) magazines continued in use long after RCs had replaced RDs as the primary book delivery technology.

Section 3: Cost for Proposed System

Estimation of future costs

As mentioned in the previous sections, there are several important "unknowns" associated with the implementation of a digital system that will be addressed and answered in several comprehensive studies which are planned to be conducted over the next three years. In addition to the consideration and evaluation of feasible alternatives for implementation of a digital system and the selection of the best alternatives, these studies will also develop detailed cost estimates for the implementation of the selected alternatives. They will use the NLS Life-Cycle Cost (LCC) model as a planning tool for assessing the system-wide impacts of implementation for any of the alternatives considered; the data elements and FY 2002 baseline values used in the LCC model are shown in appendix 7. Furthermore, some cost estimates will be refined as time passes and market forces determine the future costs for certain resources required for system implementation. Therefore, some cost estimates for the future system described in this section cannot currently be specified with great precision.

Nevertheless, in this section we describe and estimate the major component costs of the proposed future operations hybrid business model as described in section 2 of this document, knowing what we know now. The costs for operation of the hybrid model are also compared to two other alternative business models, and to the current RC/CBM-based system. As in the description of the proposed operations in section 2, "steady-state operation" is assumed here in which the conversion to the digital system is complete, DTBs and DTBMs are the primary technology employed by the program (regardless of whether, and to what degree, RC and CBM technologies are supported after the conversion), and all patrons have DTBMs. The costs associated with magazine production and distribution are not addressed in this analysis.

NLS costs

Exhibit 3-1 shows the major costs currently incurred by NLS for recorded book operations, and those estimated for three alternative business models for future operations. The assumptions and estimates associated with these major cost components are discussed below, first for current operations and then for future operations.

NLS current operations

The major costs associated with current NLS recorded book operations are shown in the bottom of Exhibit 3-1 and described below.

Current book production

Recorded titles produced annually - About 2,000 book titles are currently produced annually in recorded audio format. Masters are produced in a digital format and then converted to analog format for RC production.

Average cost of production per master - The current average production cost of a book title master is $2,662.

Annual cost of master production - The total current annual cost of producing book title masters is approximately $5,324,000.

Average RC copies per title - The average current number of RC copies produced per title is 968. Very few (approximately 10) of the most popular titles are produced in 1,500 copies; popular (approximately 20%) titles are produced in 1,107 copies; and the majority of titles are produced in 880 copies.

Average duplication cost per RC copy - The average current duplication cost per RC copy, which includes all materials, labor and capital equipment charges, is $2.75 per copy. An average book title requires 2.3 cassettes.

Annual cost of RC mass duplication - The total current annual cost of mass duplication of RCs is approximately $5,324,000. It is purely coincidental, based upon current market prices, that the mastering and duplication costs are virtually equal; the two components of work are contracted separately.

Annual production costs for RCs - The total current annual production costs for cassette books are approximately $10,648,000.

Exhibit 3-1: NLS Audio Book and Machine Costs - Three Alternative Future Systems and Current System
Alternative Business Models All Mass Produced All Duplication on Demand Hybrid Model
Distribution Center(s) Operations      
Annual Network Book Circulation 19,000,000 19,000,000 19,000,000
Proportion of Circulation Handled by Center(s) 0% 100% 20%
Annual Circulation Handled by Center(s) 0 19,000,000 3,800,000
Unit Price to Dupl.-On-Demand and Circ. (Sans Materials) 1.00 1.00 1.00
Annual Cost for Duplication and Circulation at Center(s) 0 19,000,000 3,800,000
       
Loss Rate (As Percent of Circulation) 3% 3% 3%
Annual Lost Cartridges 0 570,000 114,000
Wholesale Unit Price of 128 MB Flash Memory Cartridge 10 10 10
Annual Cost for Replacement of Lost Cartridges 0 5,700,000 1,140,000
       
Annual Circulation Handled by Center(s) 0 19,000,000 3,800,000
Average Turnaround Time (Days) 30 30 30
Average Annual Circulations per Cartridge 12.2 12.2 12.2
Inventory of Cartridges Required for Operations 0 1,560,575 312,115
Initial Investment in Cartridges Required for Operations 0 15,605,749 3,121,150
       
Estimated Initial Investment 0 15,605,749 3,121,150
Estimated Annual Operation Cost 0 24,700,000 4,940,000
       
Book Production      
Annual Cost of Master Production 5,324,000 5,324,000 5,324,000
       
Proportion of Titles Mass-Produced on DTB 100% 0% 20%
DTB Titles Mass-Produced Annually 2,000 0 400
DTB Copies per Title 968 968 1,107
DTB Copies Mass-Produced Annually 1,936,000 0 442,800
DTB Materials Cost per Copy 10.00 10.00 10.00
DTB Mass-Duplication Cost per Copy 1.00 1.00 1.00
Annual Cost of DTB Copy Mass-Duplication 21,296,000 0 4,870,800
       
Total Annual Production Costs for DTBs 26,620,000 5,324,000 10,194,800
       
Proportion of DTB Cartridges Later Reused 25% 25% 25%
Cost Reduction Due to Reuse of DTB Cartridges 4,840,000 0 1,107,000
       
Net Annual Production Costs for DTBs 21,780,000 5,324,000 9,087,800
       
Playback Machines      
Annual Average Machines Produced 35,000 35,000 35,000
Machine Unit Price 200 200 200
Annual Cost for Machine Production 7,000,000 7,000,000 7,000,000
       
Annual Parts and Batteries Cost 1,000,000 1,000,000 1,000,000
       
Annual Commercial Repair Costs (Labor-Only) 500,000 500,000 500,000
       
Total Annual Playback Machine Costs 8,500,000 8,500,000 8,500,000
       
Total Costs for Future Operations      
Initial Investment Costs 0 15,605,749 3,121,150
Continuing Annual Audio Costs (Books & Machines) 30,280,000 38,524,000 22,527,800
       
       
Current Operations      
       
Book Production      
Recorded Titles Produced Annually 2,000 2,000 2,000
Average Cost of Production per Master 2,662 2,662 2,662
Annual Cost of Master Production 5,324,000 5,324,000 5,324,000
       
Average RC Copies per Title 968 968 968
Average Duplication Cost per RC Copy 2.75 2.75 2.75
Annual Cost of RC Mass-Duplication 5,324,000 5,324,000 5,324,000
       
Annual Production Costs for RCs 10,648,000 10,648,000 10,648,000
       
Playback Machines      
Annual Average Machines Produced 40,000 40,000 40,000
Machine Unit Price 250 250 250
Annual Cost for Machine Production 10,000,000 10,000,000 10,000,000
       
Annual Parts and Batteries Cost 2,000,000 2,000,000 2,000,000
       
Annual Commercial Repair Costs (Labor-Only) 500,000 500,000 500,000
       
Total Annual Playback Machine Costs 12,500,000 12,500,000 12,500,000
       
Total Annual Audio Costs (Books & Machines) for Current Operations 23,148,000 23,148,000 23,148,000

Current playback machine costs

Annual average machines produced - While annual CBM production has averaged close to 50,000 machines during the past several years, a value of 40,000 is used for this comparison and analysis. Assuming an essentially flat program-wide readership growth trend (which has been the case for the past several years) and a program-wide repair capacity that just manages to provide annual repair requirements and keep in-repair inventories from growing or shrinking (true in some recent years, not in others), a 40,000 machine per year production quantity just manages to approximately compensate for total system-wide annual machine attrition due to both LSU and DBR machines.

Machine unit price - The current wholesale unit price for the C-1 CBM is approximately $250, the exact price of which is dependent upon the annual quantity purchased with associated quantity discounts.

Annual cost for machine production - The total current annual production costs for cassette playback machines are approximately $10,000,000, based on the annual production of 40,000 machines.

Annual parts and batteries cost - The current annual costs for CBM repair parts are approximately $2,000,000, of which about $1,500,000 is for repair parts other than batteries, and about $500,000 is for batteries.

Annual commercial repair costs (labor only) - The current annual costs for commercial CBM repairs, performed by two contractors, are approximately $500,000, which is for labor and overhead only; NLS supplies all parts for these repairs.

Total annual playback machine costs - The current annual costs associated with cassette playback machines are approximately $12,500,000.

Total annual costs for current operations

The major annual costs incurred by NLS for current RC and CBM operations are approximately $23,148,000. This value represents a baseline against which the total costs of any alternative future operations should be compared.

NLS future operations

The major costs estimated for the operation of three alternative business models for future NLS recorded book operations are shown in the top of exhibit 3-1 and described below. In the first model, NLS mass-produces all DTB titles and allocates them to network libraries; and network libraries store and distribute them. In the second model, NLS provides all circulation from one or several distribution centers on a duplication-on-demand basis, and no copies of DTB titles are mass-produced. The third is the hybrid model, in which NLS mass-produces and allocates copies of the most popular 20% of titles (constituting 80% of total circulation) to network libraries, which then store and distribute them; NLS provides duplication-on-demand circulation services from one or more distribution centers for the remaining 80% of titles (constituting 20% of total circulation).

Distribution center(s) operations

Annual network book circulation - FY 2002 total network RC circulation is assumed, which is approximately 19,000,000 copies per year and has been relatively uniform for the past several years. This includes circulation of RCs to all individuals and institutions by network libraries and MSCs, but excludes magazine circulation.

Proportion of circulation handled by center(s) - In the model wherein all DTBs are mass-produced, there would be no center(s). In the all-duplication-on-demand model, all circulation is handled by the center(s). In the hybrid model, a strict Pareto's Law assumption of 20% is used for the center(s).

Annual circulation handled by center(s) - In the model wherein all DTBs are mass-produced, there would be no circulation handled by the center(s). In the all-duplication-on-demand model, the entire 19,000,000 copies per year circulation would be handled by the center(s). In the hybrid model, 3,800,000 copies per year would be circulated by the center(s).

Unit price to duplicate-on-demand and circulate (sans materials) - A value of $1.00 per copy duplicated-on-demand and circulated is used, which does not apply to the mass-produce-all scenario. This value is based upon an estimate from a knowledgeable NLS contractor, represents the current cost of duplicating a single cassette, and is also the price for which a large regional library in the network has recently offered to circulate RCs for other network libraries.

Annual cost for duplication and circulation at center(s) - In the model wherein all DTBs are mass-produced, there would be no costs incurred for circulation handled by the center(s). In the all-duplication-on-demand model, the costs for circulation handled by the center(s) would be approximately $19,000,000 annually. In the hybrid model, the costs for circulation handled by the center(s) would be approximately $3,800,000 annually.

Loss rate (as percent of circulation) - Based upon data collected from several network regional libraries, the loss rate for books ranges from about 1%-5% on the basis of books circulated. A system-wide rate of 3% is assumed.

Annual lost cartridges - In the model wherein all DTBs are mass-produced, there would be no cartridges lost (or required) by the center(s). In the all-duplication-on-demand model, about 570,000 cartridges per year would be lost and require replacement by the center(s). In the hybrid model, about 114,000 cartridges per year would be lost and require replacement by the center(s).

Wholesale unit price of 128 MB flash memory cartridge - A value of $10.00 is assumed, which applies to all three business models.

Annual cost for replacement of lost cartridges - In the model wherein all DTBs are mass-produced, there would be no center(s) and hence no concern about lost cartridges there. In the all-duplication-on-demand model, the costs for lost cartridges requiring replacement by the center(s) would be approximately $5,700,000 annually. In the hybrid model, the costs for lost cartridges requiring replacement by the center(s) would be approximately $1,140,000 annually.

Average turnaround time (days) - Based upon data collected from several network regional libraries, the average turnaround time for book circulation varies from about 14 to 40 days. A system-wide rate of 30 days average book-circulation turnaround time is assumed.

Average annual circulations per cartridge - Based upon the assumed system-wide average book turnaround time of 30 days, the average cartridge will circulate 12.2 times per year.

Inventory of cartridges required for operations - In the model wherein all DTBs are mass-produced, there would be no inventory of cartridges required because there would be no center(s). In the all-duplication-on-demand model, a working inventory of approximately 1,560,575 cartridges would be required by the center(s). In the hybrid model, a working inventory of approximately 312,115 cartridges would be required by the center(s).

Initial investment in cartridges required for operations - Based upon the working inventory of cartridges required for the center(s)' operation and the assumed price for flash memory cartridges, the all-duplication-on-demand and hybrid models would require initial investments of $15,605,749 and $3,121,150, respectively. These costs could probably be amortized over a 20-year period (the specification for cartridges require a minimum of 250 rewrite cycles which, at 12.2 rewrites per year, equates to 20.5 years). This initial investment does not apply to the all-mass-produced model; cartridge costs for that model are included under book production.

Total distribution center operations costs - In the model wherein all DTBs are mass-produced, there would be no center(s) and hence no associated costs. In the all-duplication-on-demand model, the initial investment required would be $15,605,749 with annual costs of $24,700,000. In the hybrid model, the initial investment required would be $3,121,150 with annual costs of $4,940,000.

Future book production

Annual cost of master production - The annual cost to produce masters is estimated to be $5,324,000, and applies to all three future business models. The current process would not change in the future system. Approximately 2,000 titles would be produced as digital masters at an average cost of $2,662 per title.

Proportion of titles mass-produced on DTB - In the model wherein all DTBs are mass-produced, all titles would be mass-produced. In the all-duplication-on-demand model, no titles would be mass-produced. In the hybrid model, a strict Pareto's Law assumption of the most active 20% of total titles is used.

DTB titles mass-produced annually - In the model wherein all DTBs are mass-produced, 2,000 titles would be mass-produced annually. In the all-duplication-on-demand model, no titles would be mass-produced. In the hybrid model, 400 titles would be mass-produced annually. These estimates assume that 2,000 new recorded book titles will be developed by NLS annually, which is the current level of activity.

DTB copies per title - In the model wherein all DTBs are mass-produced, an average of 968 copies per title would be mass-produced, which is the average number of RC copies per title currently produced (1,500 copies per title for the 10 most popular titles, 1,107 for the expected most popular 20% of titles, and 880 for about 80% of titles). In the all-duplication-on-demand model, no copies of titles would be mass-produced. In the hybrid model, 1,107 copies per title would be mass-produced, since these would consist of the most popular 20% of titles.

DTB copies mass-produced annually - Approximately 1,936,000 DTB copies would be produced annually in the model wherein all titles are mass-produced, and approximately 442,800 copies per year for the hybrid model. No DTB copies would be mass-produced using the all-duplicated-on-demand model.

DTB materials cost per copy - This is the wholesale unit price of a 128 MB flash memory cartridge to be used in DTB mass production. It is assumed to be $10.00, and applies to the all-mass-produced and hybrid models. It does not apply to the all-duplicated-on-demand model because no mass-production would take place.

DTB mass-duplication cost per copy - This is the unit price of DTB mass production exclusive of materials, i.e., including labor, equipment, and overhead. It is assumed to be $1.00, and applies to the all-mass-produced and hybrid models. It does not apply to the all-duplicated-on-demand model because no mass production would take place.

Annual cost of DTB copy mass duplication - The total cost of DTB copy mass duplication for the all-mass-produced model is $21,296,000, while that for the hybrid model is $4,870,800. It does not apply to the all-duplicated-on-demand model because no mass production would take place.

Total annual production costs for DTBs - This is the sum of master production and mass-duplication costs for DTBs. It is estimated to be $26,620,000 for the all-mass-produced model, $5,324,000 for the all-duplicated-on-demand model, and $10,194,800 for the hybrid model.

Proportion of DTB cartridges later reused - It is estimated that approximately 25% of mass-produced DTB cartridges will later be reused after title popularity wanes, network libraries weed unneeded copies, and the cartridges are returned to NLS; it will hopefully be an even higher proportion, with 25% being considered a conservative estimate. This estimate applies to the all-mass-produced and hybrid models, but not the all-duplication-on-demand model.

Cost reduction due to reuse of DTB cartridges - Because of mass-produced DTB cartridge reuse, an estimated $4,840,000 cost reduction or offset applies to the all-mass-produced model, and an estimated $1,107,000 for the hybrid model. It does not apply to the all-duplication-on-demand model because no DTBs are mass-produced.

Net annual production costs for DTBs - These costs are the total annual production costs for DTBs less the cost reduction due to reuse of DTB cartridges. $21,780,000 is estimated for the all-mass-produced model, $5,324,000 for the all-duplication-on-demand model, and $9,087,800 for the hybrid model.

Future playback machine costs

The activities and costs associated with playback machines are assumed to be the same under all three alternative future business models evaluated. That is, unlike the activities and costs associated with DTB production and distribution, which would vary with the business model employed, there would be no such variation in activities and costs for DTBM production and distribution.

Annual average machines produced - It is assumed that with the improved reliability of the DTBM relative to the CBM (including greater resistance to spills), the DBR rate will be lower than the present rate for CBMs (about 10,000-12,000 per year). However, the LSU rate will be approximately the same (about 25,000-30,000 per year) because machine attributes have no influence upon this type of attrition. It is therefore assumed that approximately 35,000 DTBMs will be produced annually (versus a 40,000 baseline value used for the current system estimate).

Machine unit price - The wholesale unit price for the DTBM is assumed to be $200 (versus approximately $250 for the CBM), which is hopefully conservative. The lack of multiple electro-mechanical parts in the DTBM will result in a lower price.

Annual cost for machine production - The future annual production costs for DTBMs are estimated to be approximately $7,000,000.

Annual parts and batteries cost - The future annual costs for repair parts and batteries is estimated to be approximately half that of current costs (approximately $2,000,000), or about $1,000,000. This reduction will result from fewer repairs requiring parts for DTBMs and lower-capacity batteries being required for DTBMs (because the mechanism does not require continuous movement of media within the machine).

Annual commercial repair costs (labor only) - The future annual costs for commercial DTBM repair by contractor is estimated to be approximately the same as is currently the case for CBMs, i.e., approximately $500,000, which is for labor and overhead only, with NLS supplying all parts required for such repairs. While the DTBM will exhibit both improved reliability (fewer repairs) and maintainability (more simple and less expensive repairs) relative to CBMs, volunteers will not be able to perform certain repairs on the DTBMs, which will require greater reliance upon contractor repair.

Total annual playback machine costs - The future annual costs associated with DTBMs are estimated as approximately $8,500,000.

Total estimated costs for future operations

The estimated NLS-incurred costs for implementation of a future flash memory-based system for each of the three business models considered are as follows:

Based on this initial cost analysis, the hybrid operation compares very favorably with current operations. The all-mass-produced model is likely to have total costs approximately 30% higher than present operations, and the all-duplicated-on-demand model's total costs would be approximately 65% higher.

A sensitivity analysis was also conducted examining the factors that influence the costs of operation of the hybrid model. It was determined that, while the lowest loss rate and the shortest circulation turnaround time are of course desirable, these two factors have relatively little impact on the total costs of operations as long as they lie within the expected ranges cited. The critical factors which determine the economic feasibility of implementation of the hybrid model appear to be the total circulation handled by the distribution center(s), the unit cost of distribution from the center(s), and the wholesale unit price of flash memory.

Network agency costs

Exhibit 3-2 presents an estimation of the impacts of the implementation of the proposed hybrid system upon the major costs incurred by network agencies for provision of recorded book services for the free national library program. The bases for this estimation are assumed changes in the major cost components of network agency operations as projected by the LCC model, using FY 2002 costs as a baseline for comparison purposes. The assumptions associated with these estimates are explained below.

3-2: Estimation of Impact of Digital System Implementation on Network Agency Costs
LCC Model Component Description FY 2002 Model Baseline Value Estimated % Change Estimated Change
Cost of Initial Registration of Patrons and Record Updating 4,382,888 0% 0
Cost of Receipt, Sorting, Checking-In and Putting Away New or Returned Books or Machines 5,148,430 -20% -1,029,686
Cost of Book Inspections Performed Upon the Issuance or Return of Books 1,478,611 -20% -295,722
Cost of Reproduction of NLS Books 1,586,930 0% 0
Cost of Weeding/Shifting of Book Collections, Copy Allotment, Ordering New Items & Cataloging 1,877,589 -50% -938,794
Cost of Repair of Recorded Books, and Diagnostics, Cleaning, Record Keeping, Transport and Repair of Machines 1,853,212 -50% -926,606
Cost of Receipt of Patron Telephone, Mail & Walk-In Requests, Fulfillment of Requests, & Reader Advisory & Ref. Services 7,933,953 0% 0
Cost of Retrieval of Materials from Storage, Packaging and Mailing 4,326,964 -20% -865,393
Cost of Writing and Telephone Efforts to Retrieve Overdue Books and Machines 695,949 0% 0
Cost of Managerial/Supervisory Activities, Clerical/Secretarial Support, and Conferences and Travel 13,197,697 0% 0
Cost of Facilities and Occupancy 10,233,715 -50% -5,116,858
Cost of Equipment Maintenance 950,463 0% 0
Cost of Equipment Depreciation 2,280,936 0% 0
Cost of External Office Services 3,227,202 0% 0
Cost of Supplies 1,649,770 0% 0
Cost of Travel and Miscellaneous Associated with Facilities and Occupancy 504,111 0% 0
       
Total 61,328,420 -15.0% -9,173,059

Cost of initial registration of patrons and record updating - FY 2002 LCC model baseline value $4,382,888 per year. Operation will not fundamentally change; no cost impact.

Cost of receipt, sorting, checking in, and putting away new or returned books or machines - FY 2002 LCC model baseline value $5,148,430 per year. Assumed 20% reduction in workload because NLS will perform the same in central distribution center(s) rather than network agencies. Estimated savings $1,029,686 per year.

Cost of book inspections performed upon the issuance or return of books - FY 2002 LCC model baseline value $1,478,611 per year. Assumed minimum 20% reduction in workload because NLS will perform the same in central distribution center(s) rather than network agencies. Potentially these costs may be reduced much more because of improved reliability of DTB media relative to cassettes. Estimated savings $295,722 per year minimum.

Cost of reproduction of NLS books - FY 2002 LCC model baseline value $1,586,930 per year. Operation will not fundamentally change; no cost impact.

Cost of weeding/shifting of book collections, copy allotment, ordering new items, and cataloging - FY 2002 LCC model baseline value $1,877,589 per year. Assumed minimum 50% reduction in workload because network libraries will store only 20%, not 100%, of new titles in DTB collections. Also, RD collections will be removed prior to the start of DTB collection development in network agencies, RC collections will be reduced, and DTB media are smaller. Estimated savings $938,795 per year.

Cost of repair of recorded books, and diagnostics, cleaning, record keeping, transport, and repair of machines - FY 2002 LCC model baseline value $1,853,212 per year. The significantly higher reliability of DTBs and DTBMs, and better maintainability of DTBMs, will result in an approximate 50% reduction in this workload. Estimated savings $926,606 per year.

Cost of receipt of patron telephone, mail, and walk-in requests, fulfillment of requests, and reader advisory and reference services - FY 2002 LCC model baseline value $7,933,953 per year. Operation will not fundamentally change; no cost impact.

Cost of retrieval of materials from storage, packaging, and mailing - FY 2002 LCC model baseline value $4,326,964 per year. Assumed 20% reduction in workload because NLS will perform the same in central distribution center(s) rather than network agencies. Estimated savings $865,393 per year.

Cost of writing and telephone efforts to retrieve overdue books and machines - FY 2002 LCC model baseline value $695,949 per year. Operation will not fundamentally change; no cost impact.

Cost of managerial support/supervisory activities, clerical/secretarial support, and conferences and travel - FY 2002 LCC model baseline value $13,197,697 per year. Operation will not fundamentally change; no cost impact.

Cost of facilities and occupancy - FY 2002 LCC model baseline value $10,233,715 per year. Assumed minimum 50% reduction in workload because network libraries will store only 20%, not 100%, of new titles in DTB collections. Also, RD collections will be removed prior to the start of DTB collection development in network agencies, RC collections will be reduced, and DTB media are smaller. Estimated savings $5,116,858 per year.

Cost of equipment maintenance - FY 2002 LCC model baseline value $950,463 per year. Operation will not fundamentally change; no cost impact.

Cost of equipment depreciation - FY 2002 LCC model baseline value $2,280,936 per year. Operation will not fundamentally change; no cost impact.

Cost of external office services - FY 2002 LCC model baseline value $3,227,202 per year. Operation will not fundamentally change; no cost impact.

Cost of supplies - FY 2002 LCC model baseline value $1,649,770 per year. Operation will not fundamentally change; no cost impact.

Cost of travel and miscellaneous associated with facilities and occupancy - FY 2002 LCC model baseline value $504,111 per year. Operation will not fundamentally change; no cost impact.

The overall impact of implementation of the hybrid flash memory-based system should result in an approximate 15% reduction, or $9,173,000 savings, in the total costs of network agency operations required for support of the free national library program; the total cost of this support for FY 2002 is estimated to be approximately $61,328,000. There will be expenses associated with modifications of the circulation information system at network agencies required to support the hybrid operations model and investment in flash memory-based duplication equipment by network agencies if they choose to duplicate NLS materials or produce local special-interest materials; but whether such expenses will be in addition to the nominal cost of equipment depreciation (which includes amortization of investments in information systems and capital equipment) is to be determined. However, if there is an incremental increase due to such required investments, it will be relatively minor in the scheme of total operations costs.

USPS costs

The impact of the implementation of a future digital book and machine delivery system upon the costs incurred by the USPS for providing delivery of program materials is not considered in this business plan. The USPS is relatively indifferent to the specific modes of materials delivery used in the free national library program, as long as the materials are properly packaged, addressed, and identified in accordance with established postal regulations.

Revenues for operations

Appendix 8 contains a copy of an outline of projected long-term funding requests for the revenues necessary to implement the envisioned flash memory-based DTB and DTBM hybrid business model. This long-term projection was prepared late in FY 2003. It should be noted that the assumptions used for DTBM and flash memory cartridge purchase unit prices in the outline are consistent with those used in this initial business plan. Since this request was submitted, however, it has been determined that the media duplication unit price of DTBs should be closer to $1 rather than $2.

If it turns out that the duplication-on-demand unit price is significantly higher than $1, it may be necessary to consider a scenario whereby network agencies would reimburse the centers for all, or some, of the costs of circulation of DTBs to their patrons from NLS-operated distribution center(s). The inherent logic of this scenario is that NLS would assume a function that network agencies have performed in the program since its inception. Such a scenario, however, may not be amenable to some network agencies.

NLS intends to pay for any modifications necessary to the READS circulation system necessary to support future operations. Modifications to other circulation systems used by network agencies, whether multisite or independent systems, will have to be funded by those libraries or groups of libraries.

Section 4: Transition Plan

Rate of transition

As stated in section 1, NLS expects that ultimately most patrons of the program will download digital reading materials via the Internet using a variety of broadband channels, and will store and read books and magazines on portable playback machines designed specifically for use with such a delivery system. However, as noted, several major technological and economic impediments related to the provision of broadband Internet access to patrons of the free national library program exist and are expected to continue for some time. While NLS and the network cannot control the availability of broadband Internet access to patrons of the program, they can control the delivery systems based upon RCs and DTBs.

There is acknowledged pressure at both federal and state levels to facilitate more efficient operations in many areas, the free national library program included, through the implementation of new technologies. In certain arenas, "quick solutions" are sometimes sought, and implemented, with the primary objective of reducing the costs of operations. NLS has recently been asked on a number of occasions why the implementation of digital technology is not proceeding more rapidly.

NLS's first answer to this question is that the transition to be undertaken is too complex to proceed more rapidly and requires very careful planning and execution. This transition is more complex than the transition of technologies from RD to RC, because every aspect of the system will change, some changing more than others. The second answer to this question is that critical aspects of the proposed flash memory-based delivery system, specifically the mass production and mass duplication-on-demand of DTBs, must await further reductions in the wholesale unit price of flash memory before implementation becomes economically feasible. NLS estimates that this milestone will be reached by or during FY 2008.

Therefore, the fundamental transition strategy for implementation of the flash memory-based hybrid model delivery system is to await the necessary further reductions in the price of the media which will make mass production and mass duplication-on-demand economically feasible. However, this strategy also calls for the execution of all other necessary planning and implementation steps that can be logically performed in the interim.

Major steps in transition

Appendix 9 contains a Gantt chart of the initial transition plan to effect implementation of the proposed flash memory-based hybrid model distribution system. The major steps comprising this plan are discussed below.

Development of digital book master collection

Because the digital format is independent of the delivery system eventually implemented, collection development of digital masters has begun and is ongoing. This process began in FY 2002 with 10% of the recorded book titles produced in digital format, increasing to 50% in FY 2003, and 100% in FY 2004. All masters produced from FY 2004 forward will be in DTB format. Appendix 4 depicts planned development of the title master collection from FY 2004 through FY 2007. Approximately 2,000 new titles per year will be produced in DTB format during this period, and 2,000-3,300 old (analog) titles per year will be converted to DTB format. A goal of 20,000 total titles in DTB format by the beginning of FY 2008 has been established. Period of performance: October 2002 and continuing.

User survey

The free national library program is and always has been responsive to patrons. To this end, NLS commissioned a user survey to assess current patron-base characteristics, desires, and requirements. Results from this study, completed in December 2003, will be incorporated into several future planning studies for development of the digital system. Period of performance: June 2003 - December 2003.

Player transition study

A comprehensive structured requirements analysis is under way that will address the phasing-out of CBMs from the program and the phasing-in of DTBMs to the program. It is addressing new CBM production, procurement, repair, parts, and all other relevant factors which affect CBM operations in the program for the period prior to the beginning of transition to digital (FY 2004 - FY 2007), during the transition period (approximately FY 2008 - FY 2012) and after (FY 2013 - forward). The phase-in of DTBMs is also being addressed in this study. Because of several unknowns related to DTBMs (which will be answered in several other future studies), a flexible planning model is being developed which will allow NLS to incorporate the results from these other efforts when ready. This model will facilitate the evaluation of outcomes for alternative machine implementation plans including "fixed pots" of equipment money allocated between CBMs and DTBMs, special appropriations for procurements, and various production levels for DTBMs. Period of performance: November 2003 - September 2004.

Pilot tests of Internet delivery

A pilot test of Internet delivery of reading materials for the program will be conducted by NLS. It will begin with magazines, which will be segmented into smaller pieces in order to facilitate Internet downloads by non-broadband channels. The plan is to gradually expand coverage to more patrons and magazines over time. This will be a learning experience with regard to formulation of the long-term plan. Period of performance: October 2003 - September 2005. A follow-on pilot testing Internet delivery of DTBs is planned for 2005. Period of performance: June 2005 - June 2007.

Distribution medium and system study

A comprehensive evaluation study of alternatives for digital distribution media will be performed. Its objective will be both to evaluate and to select the digital medium to be employed in the medium-term system. At this juncture, NLS believes that this medium will be flash memory. However, this study will equitably evaluate other alternatives and select the best for implementation. It will consider, at a minimum, the possible implementation of the three business models presented in section 3. Period of Performance: April 2004 - October 2004.

DTB player and medium design contract

A single contract will be awarded to design, develop, and transition to manufacturer both the DTB for the digital medium selected in the distribution medium and system study, and the DTBM that will play the medium; a single contractor will be used in order to ensure complete compatibility of medium, machine, and software. The medium design will specify the precise physical, electrical, and mechanical characteristics of the DTB; all audio, navigation, encryption, and other software required; the general concepts (but not detailed design) for the DTB mailing container; and take into account a consideration of human factors and the needs of patrons in the design, incorporating information collected in interviews with patrons, one-to-one or in focus groups. The machine design will utilize PC-based software that has already been created to model the basic player features; take into account the best suggested features from a contest of industrial design students conducted by the Industrial Designers Society of America; specify the electronics, shell, and both physical and software user interfaces for the DTBM; take into account human factors and patron needs in the design process; and consider possible future modifications to the machine (e.g., possibly facilitating downloading of data). During FY 2004 - FY 2007, the contractor will produce small lots of DTBMs for field testing. The final phase of this contract will oversee the transition from design to manufacturing. Thus, this contract overlaps with the player production contract. Appendix 10 contains a draft RFP for this important task. Period of performance: March 2004 - July 2007.

DTB container design contract

A contract will be awarded to design, develop, and transition to manufacturer the DTB mailing/storage container. The contractor will incorporate the general concepts from the DTB designer into the design of the container. Period of performance: June 2005 - March 2006.

Distribution system design and transition
planning

A comprehensive study will be conducted to design and develop the best distribution system for the selected medium. Circulation information system designers will provide input for the distribution system design, and detailed specifications for operating procedures will be developed along with detailed resource specifications and cost estimates for all resources required. The study will consider network library operations, address concurrent operations for cassette and digital systems during the 4- to 5-year conversion period, and consider the possibility of using the random storage of DTBs in network library operations, developing specifications as necessary. The contractor performing this task will update and revise this transition business plan based upon the results of other studies completed at that juncture. It will address new book and magazine production, titles and copies produced and managed, and DTB and RC operations over a multiyear period. It will also address the issue of access to book titles not converted to DTB from analog format. Period of performance: October 2004 - October 2005.

RD phase-out

NLS will recommend that all RD collections be transferred from network libraries to NLS prior to the receipt of the first DTBs. This will be discretionary on the part of network libraries, but recommended by NLS. It is acknowledged that perhaps one-third of network libraries have already gotten rid of their RD collections while two-thirds have not. Beginning in FY 2008 or before, it will be feasible to support all remaining RD circulation from the MSCs. Some copies of RDs for certain titles may be disposed of, either in Landover, Maryland, or locally. Very few patrons will be affected by this move; FY 2002 RD readership was about 26,000, down from about 38,000 in FY 2001, and only about 9,000 are RD-only patrons. By FY 2007, there will be very few RD and RD-only readers. Beginning October 2004 and completed by May 2007.

Circulation systems design

Several contracts may potentially be awarded to design, develop, and modify the information systems currently used for RC circulation and CBM control that will also be used for DTB circulation and DTBM control. Multiple information systems must be modified in order to support the new system including the four multilibrary systems (DRA, READS, KLAS, and CUL) and any independent systems in use. In addition, the circulation system for the distribution center(s) will be designed. As stated in section 3, NLS will assume the responsibility for modifying READS, but individual libraries and groups of libraries will be responsible for modifying the independent and multilibrary systems, respectively. It is likely that one such modification will be to enable straightforward telecommunications between network libraries and the NLS distribution center(s), e.g., via XML records. Period of performance: October 2005 - October 2006.

Circulation systems implementation

The implementation of the modified circulation systems required to support distribution of DTBs and DTBMs in the new system will probably be performed both by contractor staff who modified the systems and by network library IT staff who are responsible for their operation. In this step, system programming will be completed, and all information system components (probably software only, but possibly hardware as well) will be installed, tested, and verified on-site. Period of performance: October 2006 - October 2007.

Distribution system implementation

In this step, the actual implementation of the new digital system will commence. An NLS DTB distribution center will be established and begin operations in pilot mode. There will be a single center at first, but another may be set up if warranted. Network libraries will complete any modifications necessary to accommodate the new distribution system design in this step. Period of performance: October 2006 - October 2007.

DTBM production

NLS expects to have 50,000 DTBMs in use by the end of FY 2008. Appendix 8 includes a preliminary projection for the planned production of DTBMs in the new system. In this step, a manufacturer will begin mass production of DTBMs. Network libraries will assist in determining which patrons receive the first DTBMs. One possible and logical implementation strategy is to provide the first machines to patrons who specifically request the DTBMs and/or typically request specific titles rather than accepting titles provided by a profile-select system. Other patrons, who would not yet have machines to play the books, would have their selections limited to titles not on DTB. Period of performance: September 2007 and continuing. The player production contract would have been awarded 9-12 months earlier, allowing time to create the necessary manufacturing tooling, establish the assembly process, etc.

Reduction of CBM inventory

After the commencement of the conversion period, there will be a gradual reduction in CBM inventories as DTBMs generally replace CBMs over 4 or 5 years. New CBM production will probably cease around FY 2008. The inventory then will be gradually reduced through normal attrition (through LSU and DBR). However, there will be a residual inventory and a residual RC system, the specifics of which are yet to be determined. Period of performance: September 2007 and continuing.

Media production

If flash memory is the selected medium option, mass production of flash memory cartridges will begin in this step. Commercial-standard cartridges will, in all likelihood, require modification for the program: they cannot be too small, and they must have read-only protection (unless the user has the proper "key" to write). Period of performance: beginning in FY 2007 and continuing.

DTB container production

The mass production of DTB mailing/storage containers will begin in this step. Period of performance: September 2006 and continuing.

DTB mass duplication

As previously mentioned, the mass duplication (and to a lesser extent the duplication-on-demand) of DTBs must wait for further reductions of the wholesale unit price of 128 MB flash memory cartridges. However, limited duplication in relatively low volumes could proceed at a price slightly higher than this threshold, from the perspective of bringing mass-duplication contractors online. There will initially be an issue of how many copies per title should be produced given that a minority of patrons will initially have DTBMs; there is probably an economic quantity threshold for the mass production of DTBs. Full production of DTBs will begin somewhat later (when all patrons have DTBMs). Period of performance: May 2007 and continuing.

RC mass-production phase-out

As DTBs come online in the future system, fewer RC copies per title will be required. The issue of how many RC copies per title (for both slow and fast movers) should be mass-produced will be encountered. When the conversion period begins and for approximately the next two years, a majority of patrons will still only have CBMs and hence will be able to read only RCs. However, after that period, a majority of patrons will have DTBMs, and the predominant reading medium will be DTBs. At some time shortly thereafter, the demand for RCs will fall to a point at which the economic quantity threshold for mass production of RCs is reached, and production of new titles on RCs will cease entirely. It will simply be too expensive on a per-copy cost basis to produce at such low volumes, and economic necessity will dictate the end of RC production. This is consistent with a stated objective of the Digital Long-Term Planning Group: to not sacrifice the total number of titles to be produced in order to produce large numbers of copies in either or both media. NLS will seek network input and consensus on this matter. Period of performance: May 2007 and continuing.

Weeding of RC collection

The weeding of RC collections in network libraries will continue before, during, and after the conversion period to DTBs. As demand for individual RC titles wanes, excess copies will be removed from network library storage. This trend will accelerate for those titles also available in DTB format for both converted and original DTB titles. The disposition of these weeded copies may include disposal or redistribution to other libraries. The degree to which NLS will give network libraries autonomy regarding this disposition is to be determined. Period of performance: ongoing.

Weeding of DTB collection

Weeding of DTBs will also occur as demand for titles wanes. Excess copies will either be sent to NLS DTB mass-production contractors for reuse, to other libraries that need copies of the titles, or to the NLS mass duplication-on-demand center(s) for reuse. This step will probably not begin until all patrons have DTBMs. Period of performance: FY 2013 and continuing.

Appendices

Link to a listing of appendices.

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Posted on 2013-06-28