HomeMy WebLinkAboutStaff Report 2502-4159CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, June 03, 2025
Agenda Item
2.Recommendation to the City Council to Approve New FY 2026 Palo Alto Fiber Rates and
Packages as Recommended by Utilities Advisory Commission Late Packet Report Added,
Staff Presentation
Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Utilities
Meeting Date: June 3, 2025
Report #:2502-4159
TITLE
Recommendation to the City Council to Approve New FY 2026 Palo Alto Fiber Rates and
Packages as Recommended by Utilities Advisory Commission
RECOMMENDATION
The Utilities Advisory Commission and Staff recommend the Finance Committee advance for City
Council consideration and approval the Palo Alto Fiber Rates and Packages to provide broadband
internet services.
EXECUTIVE SUMMARY
This staff report advances Utilities Advisory Commission (UAC) and Staff recommendations for a
comprehensive rate range and service package for Council to consider and authorize,
implementing and piloting broadband internet services for a pilot area of approximately 1,000
homes. Based on extensive market research, evaluation of customer needs and competitive
benchmarks, the recommended rate range and service package allows flexibility to structure
rates for special promotions, service packages, and other means to be competitive in offering
fiber services to our pilot customers.
This initial rate range and services package is competitive with standard rates from AT&T and
Xfinity and will inform and determine costs of providing the service through future phases and
roll-out. Recognizing the evolving and competitive marketplace, staff will continue to learn from
this initial phase and incorporate new service delivery strategies.
Staff presented the fiber rates and packages to the UAC on May 7, 2025. The UAC approved
the proposed maximum fiber rate structure and product offerings (6-1 vote), which enables
staff to structure rates for special promotions, service packages, and other means to be
competitive in offering fiber services to our pilot customers. This also helps the City maintain its
competitive edge over the incumbent providers. One commissioner did not recommend
approval of the proposed range of rates, preferring the City adopt exact pricing for the various
service offerings. The UAC also requested staff to return to UAC with data points, financials,
and success metrics once available from the pilot, as part of determining the viability of Palo
Alto Fiber prior to advancing phase 1 expansion.
BACKGROUND
On December 19, 2022 Council directed staff to proceed with the fiber backbone, a phased
FTTP infrastructure build approach, and a hybrid business model for providing fiber internet
services. Work continues to advance in several areas to launch a pilot service area including
development and implementation of a new Operations Support System/Business Support
System (OSS/BSS)1, engineering design and construction planning, material procurement,
marketing, service delivery, and the strategic allocation of staffing resources through either
hiring external expertise or training and assigning internal personnel to support these efforts.
On June 19, 2023, Council approved the FY 2024 CIP Budget with the new FTTP project “FTTP”,
and Grid Modernization for Electrification Project “Grid Mod”. The approval of the Grid Mod
project accelerated efforts to align electric and fiber construction, which impacted FTTP
construction. Deployment continues to minimize utility engineering pole make-ready work,
pole replacements, noise disruption, and construction activity in neighborhoods.
Following the June 2023 Council approval of the FY 2024 CIP Budget for the FTTP project, staff
has been actively laying the groundwork for implementation. Activities include leveraging
existing contracts and resources, securing the necessary approvals and permits to install a new
fiber data hut, and establishing the operational frameworks and workflows required to support
future service areas. These efforts are proceeding in parallel with the ongoing pilot program
aimed at optimizing the alignment of fiber deployment with the City’s grid modernization
initiatives.
ANALYSIS
In February 2025, the City retained Brightscape Networks/GoMo, fiber industry experts, to
analyze the residential broadband coverage, competitive landscape, and potential service
offering with the pilot area along with an operational assessment. In March 2025, Brightscape
provided a summary of their market review of the pilot area, which revealed a duopoly
between two major wireline incumbent providers Xfinity and AT&T, with Xfinity holding 100%
coverage via cable (offering speeds up to 2 Gbps with data caps and contracts) and AT&T
covering 89% with symmetrical fiber (FTTP options up to 5 Gbps without data caps or contracts.
Brightscape recommended Palo Alto offer symmetrical speeds ranging from 500 Mbps to 1
Gbps, focusing on a few plans to offer at competitive, contract-free rates with no data caps.
1 Operations support systems (OSS) manage telecom network infrastructure, ensuring reliable operations through functions like fault
management and service assurance. Business support systems (BSS) streamline customer-facing activities, such as billing, subscriptions, and
customer relationship management, to improve customer experiences. Together, OSS and BSS enhance communications operations by
connecting efficient network management with seamless customer interactions.
They highlighted the need to address challenges in serving multi-family residents where
incumbents have a long-standing presence and partnerships which limit competition.
With two major incumbent providers in the pilot area, the City would need to overcome the
hurdles of new customer acquisition, such as switching aversion - when subscribers express
dissatisfaction with their current internet service provider, the perceived hassle of switching
may prevent them from taking action. To overcome challenges like this, Palo Alto Fiber can
provide basic services which are easy to understand and competitively priced and differentiate
from other providers as being a locally owned municipality.
To optimize deployment within this competitive landscape, staff recommends an initial offering
focused on simple, easy to understand and fulfill service packages. Staff also recommends
approval for a range of rates and packages which can be easily adapted. This strategic approach
offers several key advantages. First, limiting the number of core packages simplifies the initial
deployment and provisioning processes, allowing staff to grow in-house expertise while relying
on contracted services to concentrate on efficient installations and customer onboarding.
Second, it reduces complexity in our customer support efforts and marketing and outreach,
enabling us to clearly communicate the value proposition of each plan and focus on providing
services. In a market where customers are often overwhelmed by numerous offerings,
simplicity, transparency and trust in the City can be significant differentiators. With a well-
defined range for the rates and packages, staff can quickly adapt offerings to target different
customer segments. For the pilot, the CIty is recommending offering two residential service
plans 1 Gbps and 5 Gbps for simplicity. With the proposed rate plan, the City will have the
flexibility to offer the 500 Mbps and 2 Gbps service plans if there is customer interest in these
speeds without having to wait and return to Council for approval. This also applies to the
additional equipment and ancillary services.
Staff and the UAC recommends the Finance Committee adopt the following range of rates for
Council consideration and approval the below range for the rates (Table 1):
Table 1: Palo Alto Fiber Broadband Internet Rates and Services
Residential Service Plan Pricing Comments
500 Mbps - Rate Assistance Up to $30 Monthly; Free installation and router
500 Mbps Up to $75 Monthly; Free installation and router
1 Gbps Up to $95 Monthly; Free installation and router
2 Gbps Up to $175 Monthly; Free installation
5 Gbps Up to $265 Monthly; Free installation
Commercial Internet Service Plan Pricing Comments
500 Mbps Up to $125 Monthly; Free installation and router
1 Gbps Up to $185 Monthly; Free installation and router
2 Gbps Up to $195 Monthly; Free installation
5 Gbps Up to $295 Monthly; Free installation
Additional Equipment Pricing Comments
Calix GigaSpire Up to $5 Monthly
Calix Blast Mesh Extender Up to $5 Monthly
Calix Gig Wan Port Up to $600 One time purchase
Other Service Offerings Pricing Comments
Fixed Wireless - 100 Mbps Up to $75/Month Monthly; Free installation and router
Protect IQ Up to $10/Month
Network level security to protect against
malicious threats and intrusions.
Experience IQ Up to $10/Month
Advanced parental controls with content access
and usage schedules
Smart Home - Calix Up to $10/Month
Tools to manage and secure including features
like network security, parental controls, and
smart home automation.
Smart Biz - Calix Up to $30/Month Suite of features to support small businesses.
Smart MDU - Calix
Up to $10/Month per
subscriber
Calix solution for MDU's that ads features like
community wide managed Wi-Fi for the
complex.
Commercial Dedicated 1 Gbps Internet
Access (DIA) Up to $1,500/Month
1 Gbps Dedicated Internet Access (DIA) service to
deliver dedicated bandwidth, reliable, high-
performance connectivity, and throughput
consistency.
Commercial Dedicated 10 Gbps
Internet Access (DIA) Up to $7,500/Month
10 Gbps Dedicated Internet Access (DIA) service
to deliver dedicated bandwidth, reliable, high-
performance connectivity, and throughput
consistency.
Other Contract Terms
Data Allowance - Unlimited
Month to month contract term
When entering a competitive broadband internet market with two major incumbents, a key
metric for analysis is market share or “take rate.” Within the context of fiber network
investment, take rate is an economic driver of the investment and a key metric for network
viability and success. According to a previous Palo Alto study and community broadband survey
by the City’s fiber broadband internet consultant Magellan, nationwide, the take rates for retail
municipal systems after three to five years of operation are generally between 40% - 55%. This
is much higher than the take rate of larger incumbent service providers and is also well above
the typical fiber broadband internet business plan 30% - 40% take rate. Based on the City’s
customer base and fiber business model, a 27% - 30% take rate is necessary to break even for
operational costs. Based on the choice-based-conjoint analysis, Magellan estimated a take rate
between 34% - 40% for Palo Alto Fiber. Many factors contribute to take rate, most of which
depend on successful business execution (i.e. pricing, customer satisfaction, product offering,
marketing). It is important to note, take rates should not be analyzed in a vacuum, but in
relation to all other factors that impact the broadband business.
Staff conducted sensitivity analysis models for fiber broadband internet including different take
rates ranging from 20% to 35% over four years (Table 2) based on the mid-level pricing for the
1GB and 5GB services. In addition to take rate, another critical component to reach break even
or profitability is the total number of subscribers. In the pilot area, a high take rate with a
relatively low number of available subscribers will not be sufficient to cover total operation and
maintenance costs. The speed at which the City establishes a fiber business presence (speed to
market) is critical to meet the anticipated take rate goals. With existing providers of the service,
the competitive pressure grows when implementation is prolonged. In a business environment
with unfavorable circumstances, the City would have mitigation strategies to deploy (i.e.
decelerate buildout, scale down operations, align with other infrastructure projects, realign
market focus) to address these situations.
Table 2: Take Rate Sensitivity Analysis
20% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 186 1,191 1,439 1,439
Revenues $207,000 $920,000 $1,633,000 $1,633,000
Net Income ($1,761,000)($2,111,000)($726,000)($511,000)
25% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 233 1,489 1,799 1,799
Revenues $259,000 $1,150,000 $2,042,000 $2,042,000
Net Income ($1,765,000)($2,177,000)($420,000)($137,000)
30% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 280 1,786 2,159 2,159
Revenues $311,000 $1,380,000 $2,450,000 $2,450,000
Net Income ($1,769,000)($2,243,000)($115,000)$237,000
35% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 326 2,084 2,519 2,519
Revenues $363,000 $1,610,000 $2,858,000 $2,858,000
Net Income ($1,773,000)($2,308,000)$190,000 $610,000
Staff also ran pricing scenarios with a fixed number of passings and subscribers from FY 2026
through FY 2029 with a take rate ramping up from 27% to 33% (Table 3).
Table 3: Number of Subscribers and Passings
FY 2026 FY 2027 FY 2028 FY 2029
Subscribers
250
1,684
2,399
2,399
Passing
932
5,954
7,197
7,197
Take Rate%27%28%33%33%
Under the three pricing scenarios (Table 4) and assuming a 33% take rate, operations is
projected to become positive in the fourth year. Under the higher end pricing scenario, net
income for operations is projected to be positive in year three but the model does not factor in
price elasticity of demand which could reduce the take rate and delay net positive income until
the fourth year similar to the lower end and mid-level scenarios. The service pilot will allow
staff flexibility to evolve rates and service packages, and apply learning to the next phase of
service delivery.
Table 4: Pricing Scenarios
Lower End ($)FY 2026 FY 2027 FY 2028 FY 2029
Revenues $ 164,000 $ 974,000 $ 2,215,000 $ 2,330,000
Net Income $ (1,874,000) $ (2,549,000) $ (738,000) $ 94,000
Mid-Level ($$)FY 2026 FY 2027 FY 2028 FY 2029
Revenues $ 190,000 $ 1,128,000 $ 2,565,000 $ 2,699,000
Net Income $ (1,848,000) $ (2,395,000) $ (387,000) $ 463,000
Higher End ($$$)FY 2026 FY 2027 FY 2028 FY 2029
Revenues $ 224,000 $ 1,332,000 $ 3,027,000 $ 3,185,000
Net Income $ (1,813,000) $ (2,192,000) $ 74,000 $ 949,000
For capital expenses, staff is estimating approximately $4,500,000 for the pilot. $2,500,000 of
the capital expenses are one-time costs to build and install the fiber hut and the purchase of
electronic equipment for the fiber hut and data center. The fiber hut and data center
equipment will be used to serve subsequent phases of FTTP, if approved.
Based on Council’s approval of up to $20,000,000 for the initial phase of FTTP, staff estimates
there will be $10,000,000 available for phase 1 FTTP construction. Approximately 50% of the
construction costs for the pilot are considered as one-time capital investment costs that will
benefit future expansion, should that be the Council’s ultimate decision.
FISCAL/RESOURCE IMPACT
This report is for discussion purposes so there is no resource impact. Based on UAC and Finance
Committee input, staff will recommend Council approve fiber internet rate ranges and
packages. With necessary approvals, rates would be included in the June 16, 2025 Council
budget adoption.
STAKEHOLDER ENGAGEMENT
On November 2, 2022, the UAC unanimously recommended to build fiber backbone and FTTP
under a phased approach with existing funds. The UAC expressed the goal of building FTTP is to
provide citywide high-speed internet access to all residents and businesses in Palo Alto. If
financially self-sustaining, and deemed successful, the first phase of FTTP can become a
springboard to a citywide FTTP deployment.
On December 19, 2022, City Council directed staff to proceed with the Fiber Expansion Plan to
implement the Fiber Rebuild project and Phase 1 of the Fiber-to-the-Premises (FTTP) project
without debt financing. Included in the Council’s motion was to a) maximize number of homes
and businesses passed; b) consider promotional rates to increase take rate; c) define leading
indicators and metrics to determine success; and d) recommend Council accelerate expansion if
metrics are positive, including a potential bond to streamline construction and compress
construction time as much as feasible.
On June 19, 2023, the City Council approved the FY 2024 CIP Budget for the new FTTP project,
and Grid Modernization for Electrification Project. The approval of the electrification project
accelerated efforts to align electrification and fiber construction, which impacted the Fiber
Expansion Plan. Staff is deploying a pilot to determine how to align the grid modernization
project and projects under the Fiber Expansion Plan to help minimize utility engineering pole
make-ready work, pole replacements, noise disruption, and construction activity in
neighborhoods. The pilot design was recently modified to streamline construction, and is
currently undergoing material purchasing before starting fiber construction.
Since that time, staff has engaged UAC at their public meetings, and taken community input on
various aspects of the staff’s work to date. Additionally, a project website is live and offers
information and status updates on this effort. Project updates will continue to be provided at
www.PaloAlto.gov/PaloAltoFiber
ENVIRONMENTAL REVIEW
The UAC’s recommendation for a rate and package is not a project requiring California
Environmental Quality Act review, because it is an administrative governmental activity which
will not cause a direct or indirect physical change in the environment. The FTTP project
approval was analyzed under CEQA resulting in a Mitigated Negative Declaration approved by
Council on June 17, 2024.
APPROVED BY:
Alan Kurotori, Director of Utilities
Staff: Dave Yuan, Utilities Strategic Business Manager
Palo Alto Fiber Rates and
Financials
Finance Committee
June 3, 2025
- 2
AGENDA
1.Council Approved Projects
2.Competitive Landscape
3.Capital Expenses
4.Operating Expenses
5.Pricing and Offerings
6.Pricing Scenarios
7.Cashflow
8.Measures of Success
9.Upcoming Milestones
- 3
Council Approved Projects
FIBER BACKBONE REBUILD FIBER-TO-THE-PREMISES GRID MODERNIZATION
Estimated cost $25.6M (FO-16000)Estimated cost for Phase 1 $20M;
Citywide $102M (FO-24000)
Estimated cost $250M to $306M
(EL-24000)
Funded by Electric and Fiber funds Funded by Fiber Fund Funded by the Electric Fund; debt
financing and/or grants
Supports the City’s fiber licensing
service and internal needs:
Improve fiber and electric
system reliability, security
and capacity
Enable more connectivity for
City departments
Internal communication
needs for SCADA, AMI, DA
and other critical
infrastructure
Supports the City’s high speed
broadband internet needs:
Provides City-owned
high-speed internet
service
Provides new capacity for
dark fiber licensing
Community investment in
its own broadband
network
Supports City’s S/CAP goals and
future demand
100% residential
electrification
Upgrade existing
substations,
replace transformers,
convert existing 4 kVa lines
to 12 kVa to increase
capacity and meet
future demand.
- 4
Coverage/Pricing Xfinity and AT&T – FTTP Pilot
- 5
Coverage/Pricing Xfinity & AT&T FTTP – Pilot Area (cont.)
Residential Plan Offerings Low MRC High MRC ATT Offer Comcast Offer
300 Mbps $40 $65 $42 with ATT Wireless, Otherwise $55. Also $50 reward card
offered.
$25 for 24 months, increases to $84.
500 Mbps $45 $75 $50 with ATT Wireless, Otherwise $65. Also $100 reward card
offered.
$60 for 12 months, increases to $94.
Also $100 Amazon gift card offered.
1 Gbps $55 $95 $62 with ATT Wireless otherwise $80. Also $150 reward card
offered.
$60 for 36 months, increases to
$114. Also $200 Amazon gift card
offered.
2 Gbps $75 $175 $114 with ATT Wireless otherwise $145. Also $150 reward
card offered.
$80 for 24 months, increases to
$124. Also $200 Amazon gift card
offered.
5 Gbps $175 $265 $194 with ATT Wireless otherwise $245. Also $150 reward
card offered.
Not offered
100 Mbps Symmetrical
Wireless
$40 $75 ATT Air is $60 Not offered
- 6
Estimated Capital Expenses
Type Description Total Cost
Labor Strand/Messenger Installation 186,250$
Labor Fiber Overhead Construction (~37000 feet)584,080$
Labor Fiber Underground Construction (~2400 feet)383,859$
Materials City Purchased Distribution Materials 440,000$
Materials / One-Time Hut 340,000$
Labor / One-Time Hut Installation 950,000$
Equipment / One-Time Electronics + Pro Services 1,200,000$
All Miscellaneous/Contingency (10% of Total Budget)408,419$
Total 4,492,608$
Cost Per Passing 5,465$
Cost Per Passing excluding One-Time Costs 2,188$
- 7
Operating Expense Assumptions
Description Assumption Time Period Value
Annual
Escalator Fee/Subscriber
Outside Plant ("OSP") Manager Employee Annual 300,000$ 3%
Network Operations ("NetOps") Manager Employee Annual -$ 3%
Fiber Systems Manager Employee Annual 300,000$ 3%
Help Desk Tier 1 Outsourced Per Sub 8$ $8/sub
Customer Support Tier 2 Outsourced Annual 150,000$ 3%
Network Operations Center (NOC) Services Outsourced Annual 196,607$ 3%
Equinix Collocation/Internet Exchange Port Outsourced Annual 166,925$ 5%
Bandwidth (Transport & Internet Access)Outsourced Monthly 5,000$ 5%
Fiber Plant Maintenance Outsourced Monthly 5,000$ 10%
Installation/Drops Outsourced Annual/Sub 120,000$ 5%$200/sub
Operational / Business Support System Outsourced Annual 85,000$ 3%
Reporting Shared Employee Annual 50,000$ 3%
Utilities Electric Annual 25,000$ 5%
Legal Shared Employee Annual 50,000$ 5%
Regulatory Shared Employee Annual 12,000$
Office Expense Employee Annual 12,000$
Sales & Marketing (website, door to door, etc.)Outsourced Annual + Sub 100,000$ $500/sub
Router Purchased Per Sub 400$ $400/sub
Total 1,577,940$
- 8
Proposed Palo Alto Fiber Offerings
Residential Service Plan Pricing Comments
500 Mbps - Rate Assistance Up to $30 Monthly; Free installation and router
500 Mbps Up to $75 Monthly; Free installation and router
1 Gbps Up to $95 Monthly; Free installation and router
2 Gbps Up to $175 Monthly; Free installation
5 Gbps Up to $265 Monthly; Free installation
Commercial Internet Service Plan Pricing Comments
500 Mbps Up to $125 Monthly; Free installation and router
1 Gbps Up to $185 Monthly; Free installation and router
2 Gbps Up to $195 Monthly; Free installation
5 Gbps Up to $295 Monthly; Free installation
Additional Equipment Pricing Comments
Calix GigaSpire Up to $5 Monthly
Calix Blast Mesh Extender Up to $5 Monthly
Calix Gig Wan Port Up to $600 One time purchase
- 9
Proposed Palo Alto Fiber Offerings (cont.)
Other Service Offerings Pricing Comments
Fixed Wireless - 100 Mbps Up to $75/Month Monthly; Free installation and router
Protect IQ Up to $10/Month
Network level security to protect against malicious threats and
intrusions.
Experience IQ Up to $10/Month Advanced parental controls with content access and usage schedules
Smart Home - Calix Up to $10/Month
Tools to manage and secure including features like network security,
parental controls, and smart home automation.
Smart Biz - Calix Up to $30/Month Suite of features to support small businesses.
Smart MDU - Calix
Up to $10/Month per
subscriber
Calix solution for MDU's that ads features like community wide
managed Wi-Fi for the complex.
Commercial Dedicated 1 Gbps
Internet Access (DIA)Up to $1,500/Month
1 Gbps Dedicated Internet Access (DIA) service to deliver dedicated
bandwidth, reliable, high-performance connectivity, and throughput
consistency.
Commercial Dedicated 10 Gbps
Internet Access (DIA)Up to $7,500/Month
10 Gbps Dedicated Internet Access (DIA) service to deliver dedicated
bandwidth, reliable, high-performance connectivity, and throughput
consistency.
Other Contract Terms
Data Allowance - Unlimited
Month to month contract term
- 10
Operational Financial Scenarios for Different
Take Rates
•Minimum take rate of 27% - 30% to break even for operational costs
•Speed to market is essential to achieve take rate goals
20% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 186 1,191 1,439 1,439
Revenues $ 207,000 $ 920,000 $ 1,633,000 $ 1,633,000
Net Income ($1,761,000)($2,111,000)($726,000)($511,000)
25% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 233 1,489 1,799 1,799
Revenues $ 259,000 $ 1,150,000 $ 2,042,000 $ 2,042,000
Net Income ($1,765,000)($2,177,000)($420,000)($137,000)
30% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 280 1,786 2,159 2,159
Revenues $ 311,000 $ 1,380,000 $ 2,450,000 $ 2,450,000
Net Income ($1,769,000)($2,243,000)($115,000)$237,000
35% Take Rate FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 326 2,084 2,519 2,519
Revenues $ 363,000 $ 1,610,000 $ 2,858,000 $ 2,858,000
Net Income ($1,773,000)($2,308,000)$190,000 $610,000
- 11
Operational Financial Scenarios for Different
Price Levels
Assumptions:
•Scenarios do not include price elasticity of demand
•Take rate and number of subscribers are constant for each scenario
FY 2026 FY 2027 FY 2028 FY 2029
Subscribers 250 1,684 2,399 2,399
Passing 932 5,954 7,197 7,197
Take Rate%27%28%33%33%
Lower End FY 2026 FY 2027 FY 2028 FY 2029
Revenues $ 164,000 $ 974,000 $ 2,215,000 $ 2,330,000
Expenses $ 2,037,000 $ 3,523,000 $ 2,953,000 $ 2,236,000
Net Income $ (1,874,000)$ (2,549,000)$ (738,000)$ 94,000
Mid-Level FY 2026 FY 2027 FY 2028 FY 2029
Revenues $ 190,000 $ 1,128,000 $ 2,565,000 $ 2,699,000
Expenses $ 2,037,000 $ 3,523,000 $ 2,953,000 $ 2,236,000
Net Income $ (1,848,000)$ (2,395,000)$ (387,000)$ 463,000
Higher End FY 2026 FY 2027 FY 2028 FY 2029
Revenues $ 224,000 $ 1,332,000 $ 3,027,000 $ 3,185,000
Expenses $ 2,037,000 $ 3,523,000 $ 2,953,000 $ 2,236,000
Net Income $ (1,813,000)$ (2,192,000)$ 74,000 $ 949,000
- 12
Fiber Fund Cashflow Projection
FTTP Amount
Starting Balance 20,000,000$
CapEx - Pilot (4,500,000)$
Year 1 FTTP Net Income (1,874,000)$
Subtotal 13,626,000$
CapEx - Phase 1 (10,000,000)$
Year 2 FTTP Net Income (2,549,000)$
Year 3 FTTP Net Income (738,000)$
Total 339,000$
Additional Fiber Fund Sources
New Fiber Backbone $13,000,000
Annual Dark Fiber Net Income $300,000
- 13
Measures of Success
Pilot
Reliability, Speed and Network Uptime
Demonstration of Operational Success
Positive Net Promoter Score / Customer Feedback
Take Rate Greater than 20%
Phase 1
Reduce Construction Cost
Strategic Partnerships
Take Rate Greater than 33%
Financial Sustainability
- 14
Upcoming Key Milestones
Pilot Preconstruction
•Make Ready Engineering - July 2025
•Materials Ordering/Warehousing - June 2025
•Fiber Hut at Colorado Power Station – July 2025
Construction
•Power: March 2024 - June 2025
•Fiber: July 2025 - September 2025
Operations & Customer Outreach – In Process
•Operations/Business Support Systems “OSS/BSS”
•Marketing/Events
•Community Meetings
Agreements and Policies – In Process
•Broadband Consumer Label (Price, Additional Charges, Speed, Data,
Policies)
•Right of Entry, Terms and Condition, Internet Privacy, Network
Management
- 15
Recommendation
Recommendation to City Council to Approve New FY 2026
Palo Alto Fiber Rates and Packages as Recommended by the
Finance Committee and Utilities Advisory Commission