HomeMy WebLinkAbout1999-05-10 City Council (17)City of Palo Alto
City Manager’s
TO:HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE:MAY 10, 1999 CMR:245:99
SUBJECT:DISCUSSIONS WITH RESIDENTIAL
NETWORK CORPORATION (RCN)
COMMUNICATIONS
This report is for information only, no Council action is requested.
BACKGROUND
On April 29, 1999, City staff met with officials from Residential Communications Network
Corporation (RCN). The City Attorney’s Office, Public Works, Utilities, and the City
Manager’s Office were all represented at the meeting. RCN is in the process of constructing
a communications network that will pass through Palo Alto, as it extends from San Francisco
to San Jose. The company will provide bundled phone, cable television, and Internet services
to the residential communities that it passes.
RCN initiated the discussion, and indicated that it hoped to establish several agreements
with the City of Palo Alto. Specifically, RCN is seeking the following:
An encroachment agreement, allowing it to place substructure in underground
service areas;
A pole attachment agreement, allowing it to attach its facilities to City of Palo
Alto Utility (CPAU) poles;
A franchise-type Open Video Systems (OVS) services agreement (Attachment
A), allowing it to provide phone, cable television, and Internet services to the
Palo Alto community.
RCN expects to begin construction in Palo Alto in August 1999, and is initially targeting
residential homes served by overhead facilities (approximately 80 percent of the homes in
Palo Alto). They expect a 30 percent market penetration.
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DISCUSSION
RCN Corporation is the nation’s first and largest single-source, facilities-based provider of
communications services to the residential market. The company’s primary focus is to enter
high-density residential areas with heavy communications usage and build a state-of-the-art
Hybrid Fiber-Coaxial (HFC) network capable of delivering a bundled package of services
including phone, cable television and Internet. The company’s competitive advantage is
gained by virtue of its ability to offer bundled, high-quality, competitive services, while
maintaining low overhead and operating costs.
RCN is currently providing local and long distance phone, cable television, and Internet
services in several markets spanning the highest density areas between Boston, MA and
Washington, DC. The company has entered into partnerships with Boston-Edison and
PEPCO, two major investor-owned electric utilities on the East Coast. Recently, its target
market was extended to include California, specifically, the San Francisco to San Jose
corridor. RCN’s two key markets in the Northeast and the West are characterized by high
densities (40 percent of the U.S. residential communications market spread over 6 percent
of the geography), high Internet usage, and a high level of home computer ownership..
In September 1998, RCN received a Competitive Local Exchange Carrier (CLEC) status
from the California Public Utilities Commission (CPUC), and received certification from the
Federal Communications Commission (FCC) to provide OVS services in June 1998. The
company is negotiating with several municipalities along the San Francisco-San Jose
corridor, and has officially been granted an OVS agreement by the City of South San
Francisco (March 10, 1999). RCN is currently negotiating with San Marco, Redwood City, .
and San Francisco for OVS agreements, and has already obtained encroachment permits
from those cities. Pole attachment agreements are generally made with Pacific Bell.
RCN’s distribution network is based on a two-way HFC platform. With HFC, fiber optic
cables connect optical nodes (distribution points, serving 150 homes within a neighborhood)
to RCN’s headend (Cable Television signal receiving point) in San Francisco. Individual
homes are then connected to neighborhood optical nodes with coaxial cable. In New York
City, RCN offers 91 channels on their Extended Basic tier for $31.95 per month.
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RCN currently offers long distance phone service in New Hampshire, Maine, Connecticut,
New York, New Jersey, Pennsylvania, Deleware, District of Columbia, Maryland, and
Virginia. Local telephone rates are typically 5 percent lower than the incumbent’s phone
rates, and long-distance rates are competitive, and in most cases lower than those of the
major carriers.
RCN is the largest regional Internet Service Provider (ISP) in the country. With over 500,000
dial-up customers, RCN offers a comprehensive selection of Internet services, including
dial-up and dedicated connectivity as well as Web hosting and co-location services. RCN
offers various service levels on its residential Internet product line, starting with dial-up
connections of 56Kbps, and moving up to dedicated connections of up to 10 Mbps. Cable
modems are used with the RCN dedicated connections, and are asymmetric in bandwidth
(downlink bandwidth is larger than uplink bandwidth). In New York, RCN guarantees a 1
Mbps downlink rate for $39.95 per month. RCN also offers T-1 (1.54 Mbps) and a T-3 (45
Mbps) rates, or multiples of T-l/T-3 for customers with higher bandwidth requirements.
TIMELINE
RCN expects to begin construction in Palo Alto in August 1999. Encroachment agreements
for new conduits and pole attachment agreements should be in place by then.
ENVIRONMENTAL ASSESSMENT
The Environmental Assessment for this project, as required under the California
Environmental Quality Act (CEQA), has not been completed and will be done at a future
date.
ATTACHMENTS
A. Brief Description of Open Video Systems (OVS)
PREPARED BY:Mohammad M. Fattah, Telecommunications Manager
Larry W. Starr, Assistant Director-Utilities E&O
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DEPARTMENT HEAD:
ULRICH
Director of Utilities
APPROVAL:
Assistant City Manager
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ATTACHMENT "A"
BRIEF DESCRIPTION OF OPEN VIDEO SYSTEMS (OVS)
Under the Telecommunications Act of 1996 (Act), Local Exchange Carriers (LECs) are
authorized to offer video services either by distributing programming as a cable television
system or by establishing an OVS to deliver video programming to the home. OVS
provisions were designed to facilitate entry by telephone companies, but the OVS status is
not only limited to them. General provisions of an OVS operator include:
An OVS is a facility consisting of a set of transmission paths and associated
signal generation, reception, and control equipment that is designed to provide cable
service which includes Video Programming to multiple subscribers within a City and
which has received a Certificate from the FCC.
An OVS operator must make the majority of the system’s channels available
for programming by other Video Programming Providers (VPPs), but is itself
permitted to program up to one-third of the channels. There is a 90 day enrollment
period for VPPs, and in the case of RCN of California, that period was September 9,
1998 to December 7, 1998.
The Act amends the prior definition of cable systems to exclude OVS systems.
This means that cable operators, as well as telephone companies and others, that elect
to operate as an OVS are exempt from franchise requirements;
The Act also eliminates the requirement that phone companies obtain an FCC
"Certificate of Public Convenience and Necessity" before constructing or operating
a video system. This is intended to hasten the development of video competition by
removing a barrier to competitive entry.
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