HomeMy WebLinkAbout1999-08-02 City Council (22)City of Palo Alto
FROM:
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: UTILITIES
15
DATE:AUGUST 2, 1999 CMR: 331:99
SUBJECT:DRAFT UNIVERSAL TELECOMMUNICATIONS SYSTEM (UTS) -
REQUEST FOR PROPOSAL (RFP)
RECOMMENDATIONS
Staff recommends Council approve the draft Universal Telecommunications System
(UTS) Request for Proposal (RFP), and authorize the City Manager or her designee to
proceed with implementation of the UTS-RFP process.
BACKGROUND
At its April 5, 1999 meeting, Council directed staff to proceed with issuing a Universal
Telecommunications System (UTS) Request for Proposal (RFP). The UTS is defined as a
broadband (high bit-rate, or number of bits per second that can be transmitted), open access
network comprised of high performance telecommunication cables and associated network
electronics. The UTS will provide Palo Alto residents, businesses, libraries, the Palo Alto
Unified School District (PAUSD), and local government with cost effective, reliable, high
quality telecommunications services.
DISCUSSION
Staff completed several versions of the RFP, and reviewed it with the Broadband Access
Advisory Group (BAAG) appointed by the City Manager. The BAAG is composed of
representatives from the Utilities Advisory Commission (UAC), City Council, Palo Alto
Unified School District, PA Fibernet, the telecommunications industry and the Community
Center Neighborhood. Comments from these meetings have been incorporated into the final
draft that is before Council for its review.
CMR:331:99 Page 1 of 4
The UTS-RFP is sufficiently broad scoped, and generic in form, allowing.for a wide variety
of proposals and UTS implementation strategies. Although the City supports programs that
bring fiber closer to homes and businesses in Palo Alto, the UTS-RFP does not specify a
particular network architecture or platform. The City will entertain proposals from companies
contemplating constructing solutions including Fiber-To-The-Home (FTTH); .Fiber-To-The-
Curb (FTTC); Hybrid Fiber Coax (HFC); or other type system in Palo Alto. The City
expects that fiber will eventually reach every home and business in Palo Alto, and as such,
will evaluate very closely those proposals that provide a strong migratory path from FTTC,
HFC, or others, to FTTH.
The purpose of the UTS-RFP is to solicit proposals from private companies interested in
deploying such services to the residents and businesses of Palo Alto in cooperation with the
City. The City envisions that two-way voice, video and data capabilities will be made
available to all residents and businesses, along with simultaneous access for all users, and
with services from numerous providers (all providers). With that in mind, this RFP intends
to explore the range of possibilities and opportunities to achieve this goal.
At its July 7 meeting, the UAC had an opportunity to review and provide feedback on the
UTS-RFP. The UAC’s feedback (Attachment B) has been incorporated into the attached
version of the UTS-RFP (Attachment A). Among the issues of concern to the UAC were:
-The City’s intention should be to provide high-speed access to various
telecommunications services;
-It is preferable to have a UTS that is open for competition of various service
providers;
-It is important to have a bidder’s conference prior to the bid closing date;
-The requirement for universal access should be changed to "universal access is
strongly advised";
-Dedicating only 50 percent of the capacity towards this project is not sufficient, the
capacity should be provided "in whole or in part";
RESOURCE IMPACT
Funds to prepare and evaluate responses to the UTS-RFP are available in the FY99/00
Budget.
CMR:331:99 Page 2 of 4
POLICY IMPLICATIONS
This reommendation is consistent with Council direction.
TIME LINE
Listed below are milestones together with tentative completion dates:
Milestone
UTS-RFP Release Date
Proposals Due
City Council Approval to
Commence Negotiations
Estimated Completion Date
August 1999
November 1999
April 2000
Staff expects the proposal evaluation period to start in November 1999 and to end in
January 2000. A recommendation and staff report will be forwarded to each of the
following committees:
-Broadband Access Advisory Group, (January 2000)
-Utilities Advisory Committee (February 2000)
-Policy and Services Committee (February 2000)
-Finance Committee (March 2000)
Upon completion of the review process, recommendations will then be forwarded to the
City Council in April 2000.
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.
CMR:331:99 Page 3 of 4
ATTACHMENTS
No Request for Proposal (RFP) For A Strategic Partnership to Develop and Deploy a
Citywide Universal Telecommunications System (UTS) in Palo Alto, California
Minutes from the UAC Meeting of July 7, 1999.
PREPARED BY:Mohammad M. Fattah, Telecommunications Manager
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
of Utilities
EMILY HARRISON
Assistant City Manager
CMR:331:99 Page 4 of 4
DRAFT
City of Palo Alto
Request for Proposal (RFP)
Fora
Strategic Partnership
To
Develop and Deploy
a Citywide
Universal Telecommunications System (UTS)
in Palo Alto, California
July 28, 1999
Prepared by Staff
Table of Contents
1.0 INTRODUCTION
1.t
1.2
1.3
1.4
1.5
1.6
1.7
Background
Goals & Objectives
Universal Telecommunications System (UTS)
UTS Request For Proposal (RFP). for a Strategic Partnership
Desired Profile of Respondents
RFP Process Summary
UTS-RFP Timeline
Page #
1
1
2
2
3
4
4
2.0 BRIEF BACKGROUND ON PALO ALTO
2.1
2.2
2.3
2.4
Palo Alto Demographics
Desirability of the Palo Alto Area
Estimated Size of the Palo Alto Telecommunications Market
Palo Alto’s Current Telecommunications, CATV, and Internet Service
Providers
5
5
6
6
3.0
4.0
5.0
CITY OF PALO ALTO AND CITY OF PALO ALTO UTILITIES (CPAU)
3.1
3.2
3.3
3.4
Telecommunications and the Advanced of the City’s Goals
City of Palo Alto Telecommunications Objectives
City of Palo Alto Utilities (CPAU) Overview
Existing City of Palo Alto Infrastructure and Facilities
CITY OF PALO ALTO OFFERING
4.1 City of Palo Alto Offering
CONTENTS OF RESPONSE TO THE UTS-RFP
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
Executive Summary
Planned Service Offerings
Technology Description
UTS Business Case
Implementation Attributes
Data Transport Performance Characteristics
Maintenance
Alliance with the City
Corporate Information
7
7
8
8
10
11
12
13
13
14
15
15
16
Table of Contents
6.0
7.0
ADMINISTRATIVE INFORMATION
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
6.13
6.14
6.!5
UTS-RFP project Coordinator
Letter of Interest
Availability of Drawings
Pre-Pr0posal Conference
Respondent Inquiries and Questions
RFP Revisions
Proposal Certification
Delivery of Proposals
Proposal Presentation and Format Requirements
Multiple Proposals
Proprietary Proposal Materials
Cost of Preparing Proposals
Errors in Proposals
Rejection of Proposals
Withdrawal of Proposals
EVALUATION OF PROPOSALS
7.1
7.2
Evaluation Attributes
Evaluation Process
Page #
16
17
17
18
18
18
lg
18
18
19
19
19
19
19
19
20
21
8.0 POST-EVALUATION REQUIREMENTS
8.1
8.2
8.3
Demonstrated Proof of Concept Requirement
Compliance with the Law
Availability of Drawings and Documentation
EXHIBITS
21
22
22
A.Fiber Optic Backbone Route Map
B.CPAU Dark Fiber Pricing
C.CPAU Conduit Use and Pole Attachment Fees
GLOSSARY OF TERMS
City of Palo Alto
DRAFT
July 28, 1999
Request for Proposal (RFP)
For a Strategic Partnership to Develop and Deploy
a Citywide
Universal Telecommunications System (UTS)
in Palo Alto, California
1.INTRODUCTION
1.1 Background
In I997, the City of Palo Alto Utilities (CPAU) constructed a 28 mile (4,750 fiber-mile) fiber
optic cable backbone (Backbone). The City of Palo Alto (CPA) is willing to make available,
in whole or in part, 72 fiber strands (2,016 fiber-miles) to an outside entity who is willing to
provide competitive telecommunications services to all citizens and businesses in Palo Alto.
The Backbone contains 144 strands of fiber, with 288 strands in certain sections. CPAU has
reserved 2,734 fiber-miles of the Backbone’s capacity for dark fiber licensing and other
internal uses (Exhibit A). Development and construction of the fiber optic ring was approved
by the Palo Alto City Council in August 1996, after completion of a detailed
Telecommunications Strategy Study (http://w~wv-.cpau.com/fiberservices/). CPA’s Backbone
passes Palo Alto’s major business parks, and terminates in several buildings within Palo
Alto. To-date, CPA’s involvement in telecommunications has been limited to licensing dark
fiber optic capacity to various entities within Palo Alto. A pricing structure for licensing dark
fiber is in place (Exhibit B). The current pricing structure is under review, and a new pricing
structure will be made available soon. A pricing structure for licensing conduit space and
pole attachments is also under review and will be made available soon (Exhibit C). CPA’s
Telecommunications Policy is in development and will be provided at a later date.
1.2 Goals & Obiectives
CPA is interested in maximizing the utilization of its facilities and the value received for the
use of public assets. CPA is also pursuing various strategies to reduce operating costs, protect
CPA’s infrastructure and environment, and stimulate the creation of a competitive, state-of-
the-art telecommunications network in Palo Alto. To facilitate in this endeavor, CPA is
offering, in exchange for fair compensation, to share facilities with companies capable of
providing improved alternative telecommunications services to Palo Alto residents and
businesses at the lowest possible cost.
DRAFT
July 28, 1999
1.2 Goals & Obiectives (Continued)
Ultimately, CPA’s goal is to enter into one or more arrangements to facilitate the near-term
deployment of a high bandwidth Universal Telecommunications System (UTS). CPA is
seeking potential parmers to participate in establishing a city-wide, open, switched, digital,
broadband network. Such a network must make affordable and available, high speed data
transport and Internet access, in conjunction with other voice, data, and video services to
every address in Palo Alto.
1.3 Universal Telecommunications System (UTS)
The UTS is defined as a broadband, open access network comprised of high performance
communications cables and associated network electronics that will provide Palo Alto
residents, businesses, libraries, the Palo Alto Unified School District (PAUSD), and local
government with cost effective, reliable, high quality telecommunications services.
Broadband networks offer much geater ’bandwidth’ (bit-rate, or number of bits per second
that can be transmitted) than the older narrow band technologies. The International
Telecommunications Union (ITU) defines a broadband connection as any rate higher than
the standard rate, T-1 (1.5 Mbps).
At their April 5, 1999 meeting, Palo Alto’s City Council (Council) directed staff to proceed
with implementing the UTS Request for Proposal (RFP) project (http://www.cpau.com/ftl-J).
Council also directed staff to proceed with design and implementation of a Fiber-To-The-
Home (FTTH) trial. The FTTH trial will be constructed in a small area, with experience and
results gained to assist in the development of a UTS network for Palo Alto.
(http:/i,,v~x.cpau.com/fth!)
CPA envisions that two-way voice, video, and data capabilities will be made available to all
residents and businesses, along with ubiquitous access (all users), and with services from
numerous providers (all providers). With that in mind, this RFP intends to explore the range
of possibilities and opportunities to achieve this goal.
1.4 UTS Request For Proposal (RFP) for a Strategic Partnership
Effective telecommunication is vital to information age economies such as Palo Alto’s. CPA
deems it a matter of compelling public interest to establish a first-class telecommunications
infrastructure that will serve the needs of the citizens and businesses of Palo Alto well into
the twenty-first century.
DRAFT
July 28, 1999
1.4 UTS Request For Proposal (RFP) for a Strategic Partnership (Continued)
The purpose of this RFP is to solicit proposals from private companies interested in
deploying such services to the residents and businesses of Palo Alto in cooperation with
CPA.
Examples of proposals that will be considered include, but are not limited to the following
types of engagements, or any combination thereof (listed in an ascending order of
involvement):
Use of existing infrastructure, including: joint-trench space, vault space, conduit
space, pole attachments, or other infrastructure;
Licensing of dark fiber;
Telecommunications network development and licensing of access to other
providers;
Telecommunications network development and joint-venture partnerships for the
provisioning of services, including: telephone, cable television, high-speed data
transmission, or any combination thereof;
Telecommunications network development and provisioning of bundled or
unbundled "enhanced" telecommunications services.
1.5 Desired Profile of Bidders
CPA seeks proposals from companies that are financially capable of assuming some or all
of the financial risk associated with deploying such a universal telecommunications service
network.
Telecommunications companies, may include but are not limited to telephone and cable
television companies, long distance and competitive access providers, telecommunications
network management companies, and all providers of related services. A!! are encouraged
to submit proposals.
Bidders to this RFP should have experience with the installation and operation of telephone,
high speed data, cable television networks, and other related services. Bidders should have
experience with placement and main;~enance of outside plant infrastructure. Proposals may
be submitted by a stand-alone company or through a series of partnerships such as a
DRAFT
July 28, 1999
1.5 Desired Profile of Bidders (Continued)
prime/subcontractor or a joint venture arrangement. Bidders may propose any level of
participation, bearing in mind that CPA wishes to limit its financial risk and participation in
actual construction.
1.6 RFP Special Conditions
CPA wilt utilize this RFP to select an entity with whom to negotiate a contractual
arrangement to provide telecommunications services in Palo Alto.
The following conditions apply to this RFP:
Bidders may wish to form teams or joint ventures before they respond;
CPA may encourage bidders to combine their efforts, during negotiations, in
order to best achieve CPA objectives;
CPA may modif3~, abandon, or postpone this RFP process at any time or may
elect to proceed with the RFP process in phases.
In accordance with the CPA Charter and CPA Council direction, the City Manager and
Council will approve any and all decisions resulting from this process, including any
agreement(s) between CPA and one or more bidders.
1.7 UTS-RFP Timeline
CPA expects that the UTS-RFP process will conform to the following summarized timeline:
UTS-RFP Release Date
Proposal Due Date
Ci~; Council Approval to Commence Negotiations
August 16, 1999
November 19, 1999
April "J, 2000
o BRIEF BACKGROUND ON PALO ALTO
DRAFT
July 28, 1999
2.1 Palo Alto Demographics
Palo Alto is a thriving community of nearly 60,000 people situated adjacent to Stanford
University in the heart of Silicon Valley, approximately 25 miles south of San Francisco and
14 miles north of San Jose.
Palo Alto’s flourishing business community employs over 70,000 people and includes the
corporate headquarters or major R&D facilities of companies such as Alza Corporation,
Anderson Consulting, Compaq, Daimler-Benz Research, Electric Power Research Institute,
E-Loan, E-Stamp, E’TRADE, Hewlett-Packard, Incyte Pharmaceuticals, Internet Shopping
Network, Intemet Travel Network, Lockheed Martin Missiles and Space, Philips Multimedia
Center, Roche Biosciences, Sun Microsystems, Systemix, TIBCO, Varian, Wall Street
Journal, Watkins-Johnson, WebTV Networks, Xerox Palo Alto Research Center, and
Yamanouchi Pharmaceuticals.
Palo Alto’s residential community has impressive demographics with above-average
household incomes and above-average educational levels. Approximately two-thirds of Palo
Alto residents who are over the age of 25 have had four or more years of college, half of
whom have received at least one graduate degree. Also, an estimated 80% of households own
at least one personal computer.
(http://v,~~.ciw.palo-alto.ca.usisecpafactsfs.htmli).
2.2 Desirability of the Palo Alto Area
The following characteristics make Palo Alto a desirable choice for businesses:
Palo Alto is one of three cities in the San Francisco Bay Area with a
municipally owned and operated electrical utility with a pole base, conduits,
and dark fiber cable network;
~The availability of contiguous rights-of-way and infrastructure;
~The City’s desire to become a world class telecommunications center;
~The City’s flexibility in dealing with potential partners or service providers;
~AboveNet Communication’s (formerly Compaq) Palo Alto Internet
2.2
2.3
DRAFT
July 28, 1999
Desirability of the Palo Alto Area (Continued)
Exchange (PAIX) in Palo Alto, one of a few national Internet Network
Access Points (NAP), a data and communications center at which Internet
Service Providers (ISPs) and their customers can locate their equipment for
redundant access, reliability and operational stability. The facility provides
the necessary fabric to take Internet Commerce to a new level of quality.
Estimated Size of the Palo Alto Telecommunications Market
In 1995, a consultant for the City estimated the overall market for telecommunications
services in Palo Alto at approximately $60 million per year. The consultant projected this
market to grow to $85 million per year by 2002. The table below itemizes this market
projection by type of service. (http ://w~.cpau.com/fiberservices!phase 1-3 .html/).
Telecommunications Service
Local
Telephone Long Distance
Cable Television
Internet Access
High Speed Switched Data
Ducts & Poles
995
Licensed
Infrastructure
Bandwidth
Network Access
Total Market for all Services
$ Millions % of Total $ Millions
$17.5 29%$18.1
$24.8 41%$25.7
$5.8 10%$8.2
$6.3 10%$14.8
$0.02 0%$13.2
10%
100%
$5.8
$85.8
$5.6
$60.4
2002
% of Total
21%
30%
10%
17%
15%
7%
100%
2.4 Palo Alto’s Current Telecommunications, CATV, and Internet Sen, ice Providers
The incumbent local exchange carrier is Pacific Bell. Pacific Bell has two central offices
located in Palo Alto. Competitive local exchange carriers (CLEC) include MCIWorldcom
(consisting of infrastructure deployed by Metropolitan Fiber Systems, Brooks Fiber
Communications, and MCI), the Teleport Communications Group, and NEXTLINK. Cable
Co-op holds a cable franchise for an area including Palo Alto and adjacent communities.
Cable Co-op’s headend is located in Palo Alto. Two long distance carriers, Sprint and
DRAFT
July 28, 1999
2.4 Palo Alto’s Current Telecommunicafions~ CATV~ and Internet Service Providers
(Continued)
Worldcom (formerly MCI), have points of presence in Palo Alto. Roughly 60 Internet service
providers (ISP) have points of presence in Palo Alto. Over half of these ISPs are located at
the PAIX, which is one of the largest Internet exchanges in the United States
(http:/iwww.ix.di~ital.com!).
CITY OF PALO ALTO (CPA) AND CITY OF PALO ALTO UTILITIES (CPAU)
3.1 Telecommunications and the Advancement of the City’s Goals
Telecommunications is at the heart of tremendous change throughout the United States.
Through the use of advanced technologies and the Internet, local agencies are restructuring
to address social, financial, and political changes. The commitment to furthering
telecommunications infrastructure has been embraced at all levels of government as the key
to increasing competitiveness in the global marketplace. Palo Alto has always been a global
leader in the advancement of technology. Creation of a universal telecommunications system
within Palo Alto will re-affirm Palo Alto’s lead in the technology arena, and will create a
distinctive strategic advantage, allowing for future economic prosperity.
3.2 City of Palo Alto Telecommunications Obiectives
In February 1996, Council adopted the following telecommunications objectives to guide
CPA as it considered alternative courses of action for enhancing the provision of
telecommunications in Palo Alto (http:/A~,~’.cpau.corn/fiberservices/):
Accelerated deployment of a wide range of advanced broadband
telecommunications services to all of the citizens and businesses in Palo
Alto;
Decreased costs for both conventional and advanced telecommunications
services (as compared to the costs for similar services if provided without
CPA involvement);
High quality for both conventional and advanced telecommunications
services;
Enhanced competition among telecommunications service providers and
3.2 City of Palo Alto Telecommunications Ob,iectives (Continued)
DRAFT
July 28, 1999
increased telecommunications choices for consumers (who are currently
limited to monopoly service providers for telephone and cable television
service);
Limited or no financial risk exposure to CPA.
This RFP is being issued as part of an effort to realize the above objectives for Palo Alto.
3.3 City of Palo Alto Utilities ((3PAU) Overview
CPAU provides electric, gas, water, and wastewater collection services for all residents and
businesses in Palo Alto. CPAU has an extensive network of dark fiber that is available for
license to interested parties such as telecommunications carriers, ISPs, and local businesses.
CPAU has a combined annual revenue of approximately $ t 15 million per year.
(http://wa~.citv.palo-alto.ca.us!utilities/utlfacts.html/)
3.4 Existing City of Palo Alto Infrastructure and Facilities
In 1997, CPAU constructed the Backbone and is currently licensing dark fiber to interested
parties such as telecommunications carriers, ISPs, and local businesses. The Backbone
consists of 28 route miles, with 144 or more strands of singlemode fiber along most routes.
The Backbone is approximately 52% aerial and 48% underground (Exhibit A). The fiber can
be accessed at over 40 locations, including the PAIX, and locations near Pacific Bell’s two
central offices, Cable Co-op’s headend, and the points of presence for Worldcom and Sprint.
Through CPA’s dark fiber licensing program, CPA has licensed fibers to various entities.
Additional information is available at (http://w~,~.cpau.com/fiberservices/).
CPAU is a joint owner of the utility poles in Palo Alto. The poles are owned jointly with
Pacific Belt and/or Pacific Gas and Electric. All constructidn of new plant, or relocation of
existing plant in Palo Alto shall meet California General Order (GO) 95 and GO128 rules
and regulations. CPAU also owns conduits, and CPA has the right-of-ways needed to provide
distribution of utility services within Palo Alto.
Various City buildings and property may be made available for placement of networking
equipment. Request for use of these facilities will be considered on a case-by-case basis,
depending upon space requirements and availability and any potential negative impacts upon
the primary use of the facility. Facilities may be made available at a reduced cost.
DRAFT
July 28, 1999
CITY OF PALO ALTO OFFERING
4.1 Citv of Palo Alto Offerin~
CPA may consider granting the successful bidder rights to assets and!or services that are
normally provided by CPA in exchange for fees or other arrangements. This may include:
Use of City Facilities: Non-exclusive access to some or all of CPA’s
infrastructure and facilities. CPAU has a presence in every home and
business in Palo Alto in the form of electric, gas, water, wastewater, and in
some cases fiber optic services. In addition, CPAU has approximately 72
fiber strands (2,016 fiber-miles) of spare capacity along the Backbone. For
a fee, CPAU may extend the fiber optic Backbone deeper into Palo Alto
neighborhoods to interconnect with a successful bidder’s nodes, hubs, or
other centralized distribution points;
Use of the City’s Name Brand and Logo: Use of CPA’s name and brand
equity for joint marketing efforts or co-branding rights, to the extent
practicable, such as allowing a successful bidder to use CPA’s name and logo
or to include bill inserts along with utility bills sent to CPA’s utilities
customers;
Use of the City’s Billing Services: Use of CPA’s billing services, to the extent
practicable, such as inclusion of a line item or items as necessary on the
combined (electric, gas, water, wastewater, and refuse) utilities bill
statements for the purpose of invoicing for the service or services that the
bidder proposes to provide;
Prospective bidders are encouraged to suggest other services CPA could offer to help the
bidder in successfully deploying their proposed services. However, the installation of a
telecommunications network on or in any CPA-owned facilities shall not in any way
compromise the primary purpose of those facilities.
DRAFT
July 28, 1999
CONTENTS OF THE PROPOSAL TO THE UTS-RFP
Proposals to this RFP shall address the following issues:
5.1 Executive Summary,
Bidders are requested to summarize the main points of their proposal in no more than 2
pages. The Executive Summary shall describe the type of project or agreement being
proposed, and as a minimum summarize the following:
Proposed technology for the UTS network;
Proposed UTS architecture (e.g. star bus, switched star, active double star,
passive double star, etc.) or topology;
A description of the bidder’s UTS deployment strategy;
A description of the initial rollout, with estimated 1st customer/last customer
turn-on dates;
Estimated UTS construction and operational costs;
A detailed description of what is expected of CPA, and the expected
economic deve!opment implications due to CPA’s implementation of the
UTS;
A summal3r of tangible and intangible benefits and savings to Palo Alto
residents and businesses;
~A summary on risk and how much of it CPA is expected to bear;
~Estimated gross revenue, net income, and cash balances (years 1 and 10);
A brief description of telecommunications competition in Palo Alto and the
strategy employed by the bidder to maintain a competitive advantage;
A description of sales and marketing strategies to be emp!oyed;
10
DRAFT
July 28, 1999
5.1 Executive Summary.. (Continued)
Percentage of customers in each of the Palo Alto market segments
(residential, multiple dwelling units, commercial, industrial, etc.) connected
to the UTS per year.
A narrative describing the bidder’s guarantees that no segment of the Palo
Alto market will be discriminated against, and that all residents and
businesses will be connected;
Planned service offerings;
Expected UTS service offerings and their classifications (years 1, 5, 10);
Forecasted customers by year and by service classification (years 1, 5, 10).
5.2 Planned Ser~,ice Offerings
Bidders shall describe their service offerings, and as a minimum provide details on the
following:
Description of Service Offerings: Bidders are requested to provide a detailed
description of the services to be offered to residents and businesses at project
inception, and others that will be phased in within the first 3 years of the
project;
Services by Outside Parties: Bidders are requested to identify any services,
if applicable, that wilt be provided by outside parties. Any available
documents related to agreements with outside parties shall be attached;
Capabilities of the Proposed UTS: Bidders are requested to describe the
capabilities of their approach to support the competitive provisioning of
services by multiple parties;
Description of Discounted Services to CPA: Bidders are requested to describe
any discounted services to be offered to CPA, its libraries, and PAUSD, this
should include a pricing proposal for these services.
11
DRAFT
July 28, 1999
5.3 Technolo~’ Description
CPA envisions a UTS network that wil! facilitate communications between users whether
they are on the CPA network or on other networks. CPA is in search of a network that can
be interconnected and interoperable with, existing and emerging local exchange,
interexchange, and cable television providers.
The UTS network architecture shall be non-proprietary and based on accepted industry
standards. Equipment interoperability and consumer choice of service provider are both
important considerations. CPA’s preference is for an open UTS where multiple service
providers share the infrastructure and are allowed equal access.
The UTS-RFP is sufficiently broad scoped and generic in form to allow a wide variety of
proposals and UTS implementation strategies. Although the CPA is a staunch supporter of
programs that bring fiber closer to homes and businesses in Palo Alto, the UTS-RFP does
not specify a particular network architecture or platform. CPA will entertain proposals from
companies contemplating to construct a Fiber-To-The-Home (FTTH), Fiber-To-The-Curb
(FTTC), Hybrid Fiber Coax (HFC), and etc. system in Palo Alto. CPA expects that fiber will
eventually reach every home and business in Palo Alto, and as such, will evaluate very
closely those proposals that provide a strong migratory path from FTTC, HFC, or others, to
FTTH.
Bidders are requested to provide an overview of their technical approach, including as a
minimum the following information:
UTS Network Design: A description of the UTS network design criteria,
network elements, physical media, switching and routing architecture,
interfaces, topology, protocols, system reliability, fault tolerance, availability,
operations and maintenance, and how openness of the system will be done;
UTS Network Equipment: A description of the type of networking equipment
proposed, and reasons for their selection;
UTS Interconnection and Interoperabilit~: A description of interconnection,
interoperability, and conformance to published standards. A description of
where, when, and how interconnection will occur. A description of how
interoperability between networks will be achieved is also required;
UTS Schematic: A schematic view of how the networking equipment will be
12
5.3 Technolo~ Description (Continued)
DRAFT
July 28, 1999
interconnected and integrated to create a CPA UTS city-wide network;
UTS Up~rade Plan: A plan for upgrading infrastructure as service
requirements grow;
UTS Network Security: Any network security measures that will be deployed
to ensure privacy of customer communications and prevent intrusions on
customer computer equipment.
5.4 UTS Business Case
Bidders are requested to describe their proposed financial model and business case, keeping
in mind that CPA is seeking to limit any and all financial risk resulting from implementation
of this project. The following shall be included as part of the Business Case:
~Pro-Forma Income (Profit & Loss) Statement (years 1-10);
~Annual cash flow projections, and a Statement of Cash Position (years 1-10);
Expected annual net income to CPA based on the bidder’s proposed contractual
arrangement, and appropriate cash flow and breakeven analyses;
~ Source of funding for UTS construction and operation;
~ Appropriate economic analyses and a display of the financial viability of the UTS
5.5.Implementation Attributes
Bidders are requested to describe any implementation characteristics, specifically with
respect to the following attributes:
Environmental Impact: Describe the environmental impact, if any, of the
selected approach;
Deployment Schedule: List the proposed construction and service deployment
schedules, identifying expected installation lead times to fulfill new customer
13
Implementation Attributes (Continued)
DRAFT
July 28, 1999
service installation requests;
Legal and Regulatory Issues: Describe any required interaction with
regulatory bodies, including, but not limited to, the California Public Utilities
Commission and the Federal Communications Commission;
Warranty Terms: Describe all warranty terms and conditions, including price
and performance guarantees.
5.6 Data Transport Performance Characteristics
Bidders are requested to characterize the anticipated performance of the proposed UTS
network design for data transport. Data transport refers to content ( i.e. data, video, voice,
etc.) being transported under a digital format: As a minimum, the following attributes shall
be described:
Throughput: Describe the anticipated peak, mean, and minimum throughput
for data transport between any two end stations on the network (specified in
Megabits per second);
Latency: Describe the anticipated mean, minimum, and maximum latency for
data transport between any two nodes on the network (specified in
microseconds);
Quality of Service: Describe the quality of service capabilities of the
proposed UTS network, anticipated performance improvements, and the
flexibility with which quality of service can be implemented;
Congestion: Describe the degradation of service expected under the worst
case scenario.
14
DRAFT
July 28, 1999
5.7 Maintenance
Describe any maintenance forces that are available today or will be proposed to make
available a maintenance force to respond to system failures.
Mean Time Between Failure (MTBF): Describe the worst case Mean Time
Between Failure (MTBF) component of the proposed UTS solution. Describe
what impact a failure of this component will have on the network;
Worst Case Scenario: Describe the worst case scenario for any given single
point of failure on the network, and any contingency plans to help in system
recovery;
Customer Support Calls: Describe how you plan to handle customer support
calls, and detail any procedures that will be implemented due to an escalation
of complaints;
Trouble Calls and Repairs: Describe how you plan to handle customer trouble
calls, and dispatch emergency repair crews.
5.8 Alliance with the City
Describe the ~type of alliance or partnership arrangement you are seeking to have with CPA,
specifically:
CPA Efforts in a Partnership Arrangement: Describe the steps CPA can
take to facilitate the development of your business and to ensure a
successful roll-out;
CPA’s Role: Describe the UTS decision-making structure for day-to-day
operations, and identify CPA’s role, if any, in rate setting, service offerings,
handling customer complaints, etc.
15
5.9 Corporate Information
Identify your business entity by describing the following:
~Years the entity has been in business;
~Location of entity headquarters;
~Entities that may have an ownership stake, if any;
~Current number of employees, and their locations;
~Assets, revenues, and net income for 1998-1999;
DRAFT
July 28, 1999
Percentage of annual revenues attributable to business in California;
Entity experience in the following areas:
Providing the intended services;
Developing, managing, and maintaining telecommunications
networks;
Working with other cities and municipal or investor-owned electric
utilities.
Relevant business references and contact information;
A recent annual report (e.g. SEC Forms 1 OK and 10Q) and any relevant third party assessments (e.g.,
Dunn and Bradstreet report) of your organization should be included as part of the Proposal.
6.ADMINISTRATIVE INFORMATION
6.1 UTS-RFP Project Coordinator
Upon release of this RFP, all correspondences and communications concerning this project
must be directed to the City’s project coordinator for this RFP:
Mohammad M. Fattah
Telecommunication Manager
City of Palo Alto Utilities
1007 Elwell Court, Palo Alto, CA 94303
16
6.1
6.2
UTS-RFP Project Coordinator (Continued)
Tel. :(650)-566-4541
FAX:(650)-566-4536
E-Mail: Mohammad_Fattah@city.palo-alto.ca.us
Letter of Interest
DRAFT
July 28, 1999
Bidders wishing to receive addenda to this RFP, answers to questions posed by potential
bidders, and other related information should submit a letter of interest to CPA. This letter
should be sent to the RFP Coordinator at the address shown above by August 20, 1999.
The letter of interest shall designate the individual who will officially represent the bidder
at least up to the evaluation point of the UTS-RFP (Refer to Section 1.7 for the UTS-RFP
Timeline).
The following information shall be included in the letter of interest:
Name
Title
Name of Business Entity.
Mailing Address
Telephone Number
FAX Number
E-Mail Address
A list of bidders submitting a letter of interest may be made available after award of the
contract.
6.3 Availability of Drawings
CPA staff maintains drawings and records that describe the poles, conduits, and associated
infrastructure owned by CPA for the purpose of distributing utilities throughout Palo Alto.
Bidders are encouraged to review those records before providing a Proposal. CPAU records
may be reviewed, by appointment only, and by bidders who have submitted a letter of
interest. Copies can be made for a fee, as authorized by Council. Appointments may be
scheduled by calling Electric Engineering at: (650)-566-4500 during normal business hours
(8:00am-12:01pm, 1:00pm-4:00pm).
17
DRAFT
July 28, !999
6.4 Pre-proposal Conference
A pre-proposal conference will be scheduled at a future date.
6.5 Bidder Inquiries and Questions
Specific bidder inquiries and questions concerning the RFP shall be submitted in writing to
the UTS-RFP Project Coordinator by September 24, 1999. A reply to all inquiries will be
mailed to bidders who submit a Letter of Interest by October 15, 1999.
6.6 RFP Revisions
CPA may alter parts of the RFP as a result of inquiries or questions from bidders. Any
addendum’s or revisions to the RFP will be issued and mailed to all bidders who submit a
letter of interest before the date for delivery, as per Section 6.8.
6.7 Proposal Certification
Bidders to this RFP must certify that submitted proposals will remain in effect for 180 days
after the due date for the proposal.
6.8 Delivelw of Proposal~
An original plus twelve (12) copies of the bidder’s proposal in its entirety must be received
by CPA, at the designated address no later than 5:00 p.m. on November 19, 1999.
Bidders to this UTS-RFP are responsible for ensuring that proposals are delivered on time.
Delays caused by any delivery service, including the U.S. Postal Service shall not be grounds
of an extension of the deadline for receipt of proposals. Proposals received after the
deadline will be deemed rejected and will be returned unopened.
6.9 Proposal Presentation and Format Requirements
Proposals must be "Hard Copy" and prepared on standard 8-1/2" x 11" paper. Fold-outs
containing charts, spreadsheets, etc., are permissible. The pages should be placed in binders
with tabs separating maj or sections. A table of contents, section headings, and page numbers
are encouraged. Proposal packages must be clearly marked on exterior, in minimum 1/2 inch
bold lettering: PROPOSAL ENCLOSED.
Failure to provide such marking may result in the package being opened prematurely, thereby
18
DRAFT
July 28, 1999
6.9 Proposal Presentation and Format Requirements (Continued)
invalidating the proposal.
6.10 Multiple Proposals
Bidders may submit more than one proposal in response to this RFP. However, each proposal
must be a separate, complete package which can be considered independently of any other
proposals from the same bidder. Multiple "options" within a single proposal are allowable
and encouraged.
6.11 Proprietary Proposal Materials
Subject to the requirements of the California Public Records Act, CPA will maintain as
confidential all information contained in the proposal that is designated as proprietary. Such
information should be separately bound and labeled clearly with the words "Proprietary
Information". Appropriate reference to this separately bound information must be made in
the body of the proposal.
6.12 Cost of Preparing Proposals
CPA will not be liable for any costs incurred by bidders in the preparation and presentation
of proposals submitted in response to this RFP or in presentations to CPA.
6.13 Errors in Proposals
Bidders are responsible for errors and omissions in theii" proposals. Any such errors and
omissions will not serve to diminish their obligations to CPA.
6.14 Rejection of Proposals
CPA reserves the right to reject any or all proposals at any time with no penalty, and to waive
immaterial defects and minor irregularities in proposals.
6.15 Withdrawal of Proposals
Bidders may withdraw their proposals in writing on or before November 1, 1999 at 5:00 p.m.
19
EVALUATION OF PROPOSALS
DRAFT
July 28, 1999
In evaluating submitted proposals, CPA will assess bidder proposals vis-it-vis CPA’s
Telecommunications Objectives (Section 3.2). CPA will evaluate the bidder’s business case
and technical qualifications to carry out this venture. The evaluation process will center on
three main attributes: technical, business, and implementation. Listed below are attributes
and criteria that wil! be evaluated.
7.1 Evaluation Attributes
Technical Attributes of the Proposal
-Overall UTS network design;
-Extent of the UTS network;
-UTS capabilities and types of service offerings;
-Current commercial availability and market acceptance of technology;
-Network architecture;
-Network performance/reliability/quality of service guarantees;
-UTS network scalability;
-UTS network operations;
-UTS network management;
-UTS project implementation schedule and timeline.
Business and Financial Attributes of the Proposal
-Bidder’s business structure;
-Bidder’s corporate and financial viability;
-Bidder’s applicable experience;
-Availability of a local office;
-UTS project implementation cost and service offerings;
-UTS gross forecasted revenues (10 years);
-Net revenue potential to CPA (10 years);
-Estimated UTS project break-even point (by customers and number of
years);
Pricing proposals for services to CPAU and its libraries, and the
PAUSD;
-Palo Alto customer price for service, cost to connect, and benefits;
-Business Summary.;
2O
7.1
7.2
Evaluation Attributes (Continued)
Implementation Attributes of the Proposal
DRAFT
July 28, 1999
-Timing (5 years maximum for city-wide implementation);
-Degree of"Openness", the ability of other providers to use the platform;
-Environmental impact;
-Bidder’s experience with a similar type of project.
Evaluation Process
Step 1: An evaluation team will review submitted proposals with respect to
the criteria listed above. The evaluation team will consist of CPA staff, and
may include advisors and/or experts or consultants selected by CPA.
Step 2: The successful bidder(s) will be asked to make a presentation to CPA
staff, detailing their proposal.
Step 3: Upon completion of the evaluation, the evaluation team will present
a recommendation to the Broadband Access Advisory Group (BAAG),
Utilities Advisory Commission, (UAC) and the City Council, including
referrals to the City Council’s two subcommittees, the Finance Sub-
Committee and the Policy and Services Sub-Committee.
Step 4: Upon approval by the City Council, CPA will initiate contract
negotiations with one or more bidders.
POST-EVALUATION REQUIREMENTS
8.1 Demonstrated Proof of Concept Requirement
CPA may require a successful bidder to arrange for a tour and visit of one (or more) of their
existing and on-going project sites.
CPA may also require a successful bidder to demonstrate its proposed approach on a small
scale and an agreed upon term, before entering into an agreement for deployment of a
citywide network. CPA will work with the successful bidder to enlist a group of residences,
businesses, and community facilities that represent a typical cross section of the community
for this purpose.
21
DRAFT
July 28, 1999
8.2 Compliance with the La~v
The successful bidder will be required to comply with all taws, this includes compliance with
all City construction requirements and architectural review. Pursuant to the California
Environmental Quality Act, an environmental assessment will likely be required before
construction may proceed.
8.3 Availability of Dra~ving and Documentation
Once a successful party has been selected to deploy a network, as either a demonstration or
a citywide implementation, all drawing and plans must be approved by CPA. As-built
drawings will be provided to CPA in a similar format. Documentation will also be provided
to CPA for all devices placed.
22
THE PALO ALTO
FIBER BACKBONE ",
A New Dimension in Fiber Optic Services
DARK FIBER PRICING
One-Time Setup Char~es
Setup costs are project-specific and determined by the work needed for
the proposed connection. First, an advance engineering fee must be
paid to initiate a cost study. The interconnection cost, as determined
by this study, must then be paid in advance to initiate the
intercormection work. .
Advance Engineering Fee - This fee covers the cost of an
engineering study used to determine the interconnection fe~\\\"~
proposed connection. The fee is non-ref’undable,against the cost of the project. ~V~\~,,~
Advattce Engineering Fee - $500 pe,,r neF.~op’~’tYlfloFaer than .those ld, c"~d(’e~rely w~" V’thin an existing
otTm,_2t 15~ .r@~w, lus any additional
c.~s~sso.~d .with investigating the
(~m---~xist~ng electric conduit.
Interconnection F(~,..- ~g’,~"e~vers the cost of installing drop
cables and configt2-_.i.~..~F-a.~’~f~’Jo~he backbone to create the desired
fiber ~athways..,\’I’~i’~~ection fee is project-specific and
deten:r’?k~d~g,,~,,.~. ~"~vance engineering study using the following
"C-.oKfiguration Fee -5400 per splice location
Splicing Fee - 520 per splice
Other Fees - Time and materials + 10% surcharge
Annual Fiber Usage Charges
Annual fees for the use of CPAU’s fibers must be paid in advance for
each calendar year. The prices stated below are in 1999 dollars~ They
will be prorated to reflect partial years and will escalate xvith the
Consumer Price Index as described in the required agreement.
Backbone License Fee - This fee applies for the use of fibers on the
fiber backbone that ,,,,as constructed entirely at CPAU’s expense, and is~
stated in units of’dollars per fiber per route-mile per year ($/FMY).
Base Fiber Price -$2,664/FMY, less any applicable
discounts as described below.
The following price discounts are available, up to a maximum
combined discount or" $1,598/FMY (implying a minimum fiber price
ors I,Od6/FMY), and are determined as a function of the entire
EXHIBIT B
Page 1 or’2
inventory of backbone fibers licensed by the customer:
Route Distance Discotutt -Up to S693/FMY. Available for route
distances greater than 1 mile. Discounts
increase with distance.
Ring Topolo~’ Discount -S213/FMY. Available for fibers
licensed in a complete, route-diverse
ring.
Buffer Tube Discotmt -S533fFMY. Available for fibers
simultaneously requested in groups of
12 (i.e., complete buffer tubes) alo0g a
given backbone segment.
Fiber QuantiO, Discotmt -Up to $533~MY. Available if more
than 12 fibers are licensed along a given
segment. Discounts increase with fibe~~
.quanttty. ~k
Public Benefit Discount- Subject to City Council appr~~~
additional discoun~~~rlicensees that useg~~~_ .
provide a sttbst~n~a~p~~efit in
Palo Alto. T~m~of t~e discount
’ is base~(~ am~t of public
Drop Cable Management ~~e fees apply for the useof the
drop cables, consist~ ~~}re fiber strands, that are installed by
CPAU at the c~o~~Mo connect the customer to the fiber
backbone. ~oN~rb~~at span a route of less than 1 O0 feet, the
Drop ~e)~nagement Fee - S2.57/foot for the first 12 fibers,
(existin~nduit orpole runs) plus $0.5 I/foot.for each additional
increment of 12 fibers requested by
the customer (for any poaion of a
drop cable installed in existing
conduit or on existing poles).
Drop Cable Managenlent Fee -
Ozew conduiO
S0.51/foot for the first 12 fibers,
plus $0.5 l/foot for each additional
increment of 12 fibers requested by
the customer (for any portion of a
drop cable installed in new conduit
installed by CPAU at the¯customer’s sole cost and expense).
UTILITIES
EXHIBIT B
Pa~ 2 of 2
City of Palo Alto Utilities (CPAU)
Conduit Use and Pole Attachment Fees
CPAU Conduit Use Fee Schedule:
Exclusive Use:$1.01/Foot-Yr
Non-Exclusive Use: $0.50/Foot/Yr
CPAU Pole Attachment Fee Schedule:
a.Annual License Fee: 516.33
EXHIBIT C
Glossary of Terms
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
BAAG:
Backbone:
CLEC:
Council:
CPA:
CPAU:
FTTH:
MTBF:
PAIX:
PAUSD:
QOS:
UAC:
UTS:
Broadband Access Advisory Group
City of Palo Alto Fiber Optic Backbone Cable
Competitive Local Exchange Carrier
City Council
City of Palo Alto
City of Palo Alto Utilities
Fiber-To-The-Home Trial Project
Mean Time Between Failure
Palo Alto Internet Exchange
Palo Alto Unified School District:
Quality of Service
Request for Proposal
Utility Advisory Commission
Universal Telecommunications System
[Excerpt from Utilities~Advisory Commission Minutes-
Meeting of July 7, 1999; Item # 2]
UNFINISHED BUSINESS
2. UTILITIES UTS RFP REVIEW
(Commissioner Ferguson leaves the meeting for this discussion)
~a~: The report that you have is essentially the one that we
presented at the last UAC meeting. It was tabled, so we are prepared to
answer questions that you might have tonight.
~oner Johnston: I would like to pose the question that Margaret
Cooley posed earlier this evening, and determine staff’s position on it.
Let me try to frame that issue. In terms of the criteria that are laid
out for potential bidders becoming the successful bidder, there isn’t
anything that specifically makes reference to fiber to the home as being
not just a requirement. That would perhaps be a strong position, but
even a benefit, something that would be looked upon as being positive in
the review process. So the question that was being posed was, could you
include that or why don’t you include that? What is staff’s position
with regard to that issue?
Mr. Fattah: I think the only reference to the fiber to the home was
that the city is in the process of testing out the fiber-to-the-home
project. Data that will be available upon compleqion of the fiber-to-
the-home test can be used by whoever is the successful proposer for the
UTS RFP in terms of the development of a network. The RFP is pretty
generic. It talks about fiber in certain areas, and refers to a
broadband network, but it does not say fiber to the home anywhere in the
RFP itself. I guess the reasons that make it generic to me is that you
would like to see what sorts of proposals you could get on both ends of
the spectrum whether it ends up being HFC al! the way to the fiber to
the home.
~ommissioner Jo~: I personally understand that and actually agree
with that, but I don’t think it should be a requirement that fiber to
the home be a part of any proposed solution. I do not support that.
However, having said that, given relatively equal responses between two
potential responders, I would be very much in favor of taking the
response that is technically superior in the sense of providing access
to. higher speeds. Even that is not talked about in the evaluation
attributes. It can be interpreted, because you say things like "overal!
UTS network design" but in that statement, you are not indicating any
preference toward a design that achieves higher speeds, for example. It
just seems to me that speed is a desirable thing, or bandwidth, however
you want to look at it. It almost ought to be an attribute that is
viewed positively. Again, I do not mean that people have to respond by
106
saying fiber to the home, but by being a little more specific that you
are looking for speed bandwidth and that it would be viewed favorably
would be a suggestion that might not go all the way toward satisfying
what Margaret Cooley has suggested, but it would be a step in a positive
direction. Do you care to comment on that?
~L~: I think I agree with you, and in terms of the attributes,
of course, we have Section 7.1 that talks about the technical attributes
of the response. Again, they do not point toward a specific type of
technology. It is kept very open, giving us the final say in terms of
which direction we want this project to end up going in. We can
probably add the speed attribute somewhere within the technical section
of this UTS RFP. I think that is a good comment.
Thank you.
Commissioner Gruel: How universal is universal? If there is some guy
living a mile off Page Mill Road up there in the foothills, do you have
to extend service to him also?
~: It is our desire to have service as universal as universal
is to get to every single residence and business in Palo Alto. You are
probably aware of the Anaheim project where the term "universal" was
used, and I do not think they have been able to get to any of the
residences as yet. So universa! is what we are hoping for.
~mmissioner Gruen:
each access?
Was it your intent that the cost be the same for
That is correct.
: So would the folks who live, say, three miles away
from the nearest piece of the backbone would be charged the same amount
as the folks who live half a mile away from the backbone?
MrS: Yes, that is typical today. If you purchased telephone
service through the telephone company, you would pay the same amount
whether you were up in the hills or down in the valley.
C~ommissioner Gruel]: Well, I believe it depends upon where you are. If
you are in a location that does not have telephone service now, and you
say, I would like telephone service, the phone company will provide it,
but they will charge you for their cost in doing so.
MrS: As a city, even for gas or electric service, we do not
price it differently for someone living up in the hills versus someone
living downtown.
P~o!n ’ ’: Do you mean that if someone built their house in
107
some previously unoccupied area, and to get electricity to them, you
needed another half dozen electric poles and wiring, who would pay for
that?
MIL~: Well, Commissioner, there are always going to be
exceptions. I think the intent of universal service is to try and
provide it to as many people as practicable within the city, or it may
be divided into two cost components. Somebody that is in those unique
situations that you mentioned may have a connection charge. But I think
that Mohammed’s point that once it is connected, the cost for the
monthly service may be exactly the same whether you are in the foothills
or down in the main part of the city. It is conceivable, based on the
scenario that you have that there will be some unique situations where
an extra charge for that connection may be imposed on that particular
resident.
Commissioner Gruen: What do we do now for electric service? Do we make
a charge for the extra poles to get there?
~: We do not do that. If you have to extend an existing line
to a new customer, they have to pay for that, but the price of
electricity is the same, no matter where they are.
Commissioner Gruen: So the installation charge is different, but the
per kilowatt hour charge is the same.
~£r~: Yes, exactly the way I described it for this universal
service. There is always going to be an exception in the connection
charge for some unique situation, but that does not mean that we would
differentiate in what that monthly cost would be per kilowatt hour or
per therm of gas, once it is connected.
Commissioner Grub!l: We do charge higher rates for garbage in the
foothills on an ongoing basis. There is no connection charge, although
I know you do not consider garbage a utility. It appears on your
utility bill, even if we do not call it a utility.
About how many folks do you expect to send this to?
~: I have been compiling a list. I have about ten different
companies now. There are other cities that are doing something similar
to what the City of Palo Alto is currently doing, so we are hoping to be
able to access their lists as well and increase the number of potential
proposers for this UTS RFP through them. I expect anywhere between 15
and 20.
: Do you care to make a guess as to how many
responses other folks have gotten?
108
~: I have heard three for the City of Pasadena, which is the
other one to whom I just sent out a UTS RFP or something similar to
that. They sent this out a couple of months ago, but I have not been in
contact with them lately, so I am not sure exactly how many responses
they have gotten. There was the City of Austin a year or so ago that
had quite a few responses. There are some other cities in the Midwest
as well that have done this same type of thing. I would imagine we
would get anywhere between four and five responses.
~ommissioner Gruen: Let me understand the basis on which you go for a
special deal for someone who did what you want, who offered a better
universal package, if you will. Most of the rates that the city charges
for things are rates that you can look up in a price list. If you want
a policeman to direct traffic for your block party, there is a price per
hour for doing that. If you want to sign up for some sort of class,
there is a price for doing that.If you want to go to Foothill Park,
that is in the city’s price list.If you want electricity, there is a
tariff that tells you about that.What is the basis for saying, we will
charge a different price for fiber optic cable if you do good things
rather than if you are just someone who comes in and says, I want to
rent some fiber optic?
~L~: I guess the goal here is to make good use of the dark fiber
that is currently in place. We only have customers that use up about 4%
of the current capacity. If we get a provider to provide competitive
service, Telecom services, to the citizens of Palo Alto and use up 50%
of the capacity, then we can say we have invested wisely in the dark
fiber infrastructure.
: Let me try to rephrase the question. Suppose you
had a case in which you had three different folks who said they would
like to rent dark fiber from you to provide service to residents of Palo
Alto. One of them met your best set of criteria for universal service,
and the other two did not. They said, we did not make it onto your list
of top customers, but we want to buy some fiber anyway. Are you
proposing to charge different rates for the use of the fiber for those
two different potential customers?
MrS: We currently have a fiber fee or rate that we use. Anyone
who is interested in licensing or taking up some fiber would go under
that rate. The proposal under this UTS RFP will give special privilege
to whoever comes in and takes a large quantity of fibers, specifically
to provide Te!ecom services to all residents and businesses within Palo
Alto at a discount.
~]me~: Would someone else who offered to rent the same
amount of fiber also get the same discount?
That is a good question that I have not yet pondered.
109
M!L~: I am no~ quite sure where you are going with this.
Obviously, what we are trying to do is to find a service provider that
wants to work with the city and provide services, so I think the
suggestion is that we are going to try to have an inducement and an
economic benefit for them to do it, and at the same time, to benefit us.
If someone else comes along after that is all put together, the rental
cost or the cost to get the same kind of fiber service may be different,
because they would not have the same kind of contractual arrangement
that we had to install it. So it is a question that I am not.sure we
have a response for. I am trying to understand what you are asking.
C_o~sioner Gruen: What I am looking for is the basis for giving a
discount to one customer for the fiber rental service, if you will, and
not giving it to some other customer with similar quantities or
locations.
~gm~: I’m sorry, but I do not quite understand what you mean by
a customer. Are you talking about someone who gets the ultimate
service, or somebody who comes in and wants to be a wholesaler or wants
to buy or rent a part of the fiber so they can resell it to somebody
else.
C_o!nmissioner Gruen: The two potential customers of the city’s dark
fiber rental service that I am thinking of is someone who meets the
universal service as best as you are able to get, and someone else who
says, I am going to see if I can cherry pick on this. I wil! provide
service only for the residents who live in the flat lands, and I will
not do the foothills, but I am going to buy about the same amount of
dark fiber, once you rent it to me.
~F~: The other thing is that this is more of a partnership type
of agreement where there is potential for revenue sharing, as well. So
what we are trying to do is to attract someone to come in and use the
infrastructure and provide competitive services be!ow cost and of high
performance, and at the same time, potentially sharing revenue with the
city.
: i think i understand some of what the city would
like to get out of it, but what we have available by way of dark fiber
is all down here in the flat lands. There is nothing that goes beyond
Foothil! Expressway. So if you had your "preferred provider," a person
who had reached some agreement with the city, and they said, we think we
need an initial allotment of twenty fibers to do this, and the city
said, okay, here is the discount we will give you for that. Now along
comes someone else who says, I want to rent twenty fibers, will that
second person who comes along be without benefit of this universal
service? Does he get a different price, or does he get the same price?
MZl~Sih~ur: We are proposing to give a lower price to someone whom we
ii0
can partner with through the competitive bid process tD give superior
service over the other competitors who had bid on this. So they would
get a better price than anyone else.
C~ommissioner Gruen: And what is the basis for offering them that better
price? You do not give a better price to some company who wants rural
electric service rates just because they say, I promise to do business
only with Palo Alto. Or do we??
MIL~: i think we are talking a totally different situation. We
are looking for somebody to partner with or to venture with us into an
area that we have never done before. This is not the same as a
customer coming along and asking for electric service in a mature system
that we currently have in place that has costs that have been paid for
by all of the rate payers for a long period of time. That is not what
we are venturing into at the outset. So again, I am having difficulty
understand this. Could you give us more basis or background on why you
are asking this question? I could try to be able to answer it more
accurately.
C~ommissioner Gruen: I am envisioning the case where more than one
company thinks it is worthwhile to provide service to some of the
residential areas in Palo Alto. There are already people who are
providing service to some of the businesses. Their fiber is in place,
bits are going back and forth, and we have already had that piece of our
lunch eaten by someone else. What I am envisioning is that we arrange
to have a partner somewhere and we will arrange to give them a
discounted rate because they are doing this partnership, and then, along
comes some other company which wants to get into the business, and says,
we will do it without the partnership. We will buy the same amount of
stuff, so wil! you sell it to me for the same price? Do you sell it to
them for the same price?
: Let me try to restate this question, because I think I
understand where Richard is going with it. We have two responders to
the RFQ. One responder says, you get full universa! service for
everybody. The second responder says, I don’t want to do that. I just
want to serve a segment of your town that is compact, close in, etc. I
believe Richard’s question is, Company A and Company B both want to
lease twenty strands of fiber from you, then entire loop, just so that
the group models are the same query. Both of those guys get the same
price for leasing dark fiber. Admittedly, you can make deals on access
through the poles, and might pay less, although we have a schedule for
what it takes to string fiber on city poles, new fiber out to hit our
neighborhoods and our businesses. Do I state the question properly?
rAte!l: Yes, you have.
don’t think there is an answer to that
i!!
question. The answer is that you do not know. It is. not even clear
that that is what is being offered. There may be solutions of revenue
sharing. It is not like there is a price list going out at one price
and another price. I just think this discussion is entirely
hypothetica!, and we should wait until we get the responses back, and
take a look at them at that time. If there is an issue related to that
with regard to what we should put in the Request for Proposal, we should
discuss that, but I don’t think weshould get too tied up in how we are
going to price things now. It just seems hypothetical.
Does that satisfy you, Richard?
~ommissioner Gruen: I think the Request for Proposal says just what you
have been telling us, that you are going to offer some discounted price
to folks who are willing to do what you want. What I am looking for is
what is the basis for offering a discounted price. What is it that
qualifies these folks for a discount when someone else, buying the same
amount of product, would not get the discount.
~: The discount goes to the successful bidder or to the
successfu! partner that we do this project with, because obviously, they
have offered the best overall package to benefit the citizens. If
somebody has an inferior product and wants the same discount, we are not
going to give it to them. That is the whole idea of doing the proposal
-- getting somebody to come here and offer a package to the citizens and
businesses in Palo Alto. That is why we are giving them a discount. If
somebody else comes along and does not offer that kind of service or did
not get selected, then they can still lease fibers from us, but it is
not going to be at a discount. That is what we are trying to do here.
We are trying to lure someone into town to work with us and provide an
alternative service to everyone.
M~ihr~: I think what I am having difficulty with is that I look at
this as a service and a business venture that we are trying to see if it
will be successful. I am trying to understand how you would offer an
inducement to a party that comes up with a superior product and
convinces us that it is in the best interest of getting universal
service throughout the city. We sign a contract with them, and then
someone else comes in and asks for exactly the same situation. If I
were the other business that had just cut an arrangement with us and
responded to the RFP, why should somebody else come in and be able to
get exactly the same thing. As Larry points out, that is not the same
thing that we are looking for, and is, in our minds, something less than
what should be here. It is very difficult to understand how you would
want to give that same kind of price to a second party. Now if they
came in and had something superior and it was in our best interest to
have another contractual arrangement with them, we would look at their
individual situation, what it is they are offering, and then try to have
a contract with them to provide that particular kind of service.
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Eh~: Could we leave it at that, that the ~entire proposal
wil! be looked at in aggregate, and that will justify the decision as to
which offer to take?
Commissioner GrLten: No, I want to pose two cases here. Let’s take the
cable TV case. Someone comes in and says, I would like to offer cable
TV service. A number of someones show up and want to do that. We look
at the offerings that they-would make to the residents of Palo Alto, and
one of them offers that there will be a dozen public access channels.
The other says, we will not make any promises about public access
channels. So we, in our wisdom, say that public access channels are
good, and we would like to have that. We will do business with the
folks who are offering a better package. The folks who are offering
what.we deemed to be a lesser package say, yes, but I want to be able to
do it, too. We would say no, we picked the better package and we want
to do it with them. Do we get to do that? I didn’t think we got to do
that in the case of cable TV. What is different here that would allow
us to do something different in this case?
very well.
In fact, we did do that with cable TV.I recall it
Commissioner Gruen: You are right. I should ask staff the question
rather than the commission. The question is, do you see something
substantively different in the case of data transmission from cable TV
transmission?
Mr_~SiLar_r: Is your point that we do not have the right to offer a lower
price to one customer as opposed to other people, no matter what we are
doing here?
: Not based on your analysis of who gives better
service, as opposed to the product which people want to buy from you is
different.
M!L~SZ~_r_r: Then I don’t think we are prepared to give you an answer
tonight. It appears to be a legal issue, and we need to see if we have
the right to do that. I guess I do not know the answer.
: Have you had any discussion with the legal
department about this?
~h: Are you talking about the discount, or the right of
somebody else to come on and utilize --
: Whether you can have a preferred customer who gets
better rates than other similar customers. Customers, as measured by
what they want to buy, rather than by what service they are going to
deliver.
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~ur~: I have n~t had a specific conversationwith the legal
department on that. I frankly had not thought it was a question to ask
them.
Commissioner Gruen: Suppose someone comes along and wants to offer a
different service from the one that you had in mind. They want to offer
a hybrid service rather than a complete fiber service. How will you
weigh that? What are your criteria for putting more or less emphasis on
future opportunities for growth, rather than satisfying current demand?
kt~: i think we are looking at the whole package, and it is
difficult to say today how we would evaluate something like this. There
is no telling what some proposals will come in with, so I think it is
very difficult to come up with an answer today.
~: We would welcome somebody coming in with a whole different
idea that could demonstrate the superiority of it, the cost benefits to
it, the additional services that the customers could receive. I think
that is part of the whole point of getting responses. We would clearly
look at that. We would welcome having someone come in and give us those
kinds of ideas. We would evaluate it under some of the similar
criteria. Is it beneficial overall? Who benefits from it? What is the
cost? What is the value? What is the long-term future of the use, and
also the integrity of the company behind the proposal that came in.
Have they done it before? How good is it in other places? We do a lot
of due diligence on something like this before finalizing it.
~~~: I can think of a situation where, say you get
someone who says, I am going to provide ten megabit service and hundred
megabit service, and I am going to provide it at some set of rates.
Someone else comes in and says, we will provide one megabit service at
this much lower rate, and we will also provide ten and hundred megabit
service for those people who want it. Is one of those services better
or worse than the other?
MrS: Well, it depends upon who it is that is evaluating it. I
think we have to look at what is to the overall benefit of the customers
that are here, so you need to understand what the customers are
interested in, .and try to provide the services that they want. That
would clearly be part of the evaluation process. I think that is the
benefit of our being involved in doing this. We can look out for and
receive input from our potential customers here in Palo Alto. Clearly,
that is our charge.
Cllai_rlna!l_D~kwm~s: I have just a couple of quick items. I was worried
about the requirement that the system be open to competition of various
service providers, at least that is the way I read it on Page i!. I
think of the problems that AT&T is currently running into after their
TCI acquisition and their intent of being sole providers and having some
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cities, in effect, legislate open access to cable systems that AT&T is
about to upgrade very substantially. The noises come back that they are
not going to make that upgrade if the cities insist upon opening up
their plant to competitive ISPs and competitive service providers. I
think it is highly desirable. I would commend to the staff to think
about revising that wording, indicating that it is preferable to have a
system that is open to outside providers but to require it might
foreclose any bids. As we all know, putting ~in the plumbing is not
where the money is. Providing the service is where the money is, and we
want to induce people to make proposals.To me, that is one way of
almost assuring that we will not get any.
Secondly, there is an implication on Page 14 that the City of Palo Alto
is going to be involved in the setting of rates. Obviously, as a
partner (this is in Section 5.8) in terms of a true partnership where
the city was incurring financial risks, it is clear here that we do not
want to do that and probably will not, but a true partner that is
putting up the money and splitting the revenues is able to talk about
setting rates. But if you are basically a passive guy who is leasing
out cable space and poll space and say, look, you cannot charge this or
that, then again, I think we aregetting into a poor place where it will
really limit our number of respondents. So I would be very clear on
what sort of rate setting mechanism that the city would set up here.
Thirdly, to me, reserving 50% of the fiber may be too limited. I would
commend to you that you think about saying leasing "in whole or in
part." In other words, if a provider wants to take on our customer base
and basically run the whole system, I think that is an alternative that
we should entertain. It would give them total control over the
facility; we would reach our objective of having a service provided to
our businesses and our citizens and again, it just allows people greater
flexibility in thinking out of the box on how they would do this. We do
not have to. We would prefer to retain up to 50%, but at least say, "in
whole or in part."
Further, on the universal service, Page i0, I wrote in the margin here
"Can access the system, if desired." In other words, rather than
mandating universal access, it would be that it is strongly advised that
the respondent include universa! access or have the ability of people to
access the system, which I guess goes to John’s comments. If they want
to pay a disproportionately large access fees or installation costs if
they are in a remote location, they could do so.
Lastly, it seemed as though there was a relatively short amount of time
between the issuance of the R.Q. and a request for responses. There was
no bitters conference, that I could see, which sometimes can be a very
cost-effective way for staff to impart knowledge to people, getting
everybody in one room and ask and answer questions, because they often
tend to be similar. If there are no other questions or comments, this
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meeting is adjourned.
ADJOURAIMENT: The meeting was adjourned at 11:50 p.m.
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