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Home My WebLink AboutStaff Report 422-09City of Palo Alto City Manager's Report TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DATE: NOVEMBER 16,2009 REPORT TYPE: Information DEPARTMENT: ADMINISTRATIVE SERVICES CMR: 422:09 SUBJECT: Status of Institutional Network Negotiations with Com cast This is an informational report and no Council action is required. BACKGROUND In 1983, the cites of Palo Alto, Menlo Park, East Palo Alto, the Town of Atherton and portions of San Mateo and Santa Clara counties entered into a Joint Powers Agreement (JPA) for the purpose of obtaining cable television service within these jurisdictions. The JP A gives Palo Alto the sole authority to administer the cable franchise process on behalf of its members. On July 25,2000, the City entered into a franchise agreement with AT&T. In 2002, the Council approved the transfer of control of the franchise to Comcast Corporation after Comcast Corporation acquired AT&T's franchise. In March 2003, Comcast Corporation began running the cable system under the name Comcast. As the administrative agency for the cable JP A, the City is responsible for overseeing and enforcing the franchise with Comcast. The franchise required Comcast to complete an upgrade of the cable system, which included the construction of a fiber optic Institutional Network (I-Net). The I-Net is a network of fiber optic cable connecting 70 public schools, public buildings and community centers in the JP A service area, with the capability of providing voice, video and data communication among and between the I-Net sites. Comcast finalized construction of the dark fiber network at the end of2005. In 2006, the JPA procured the equipment needed to activate or light the I-Net. In 2007, the JPA began the process of activating the I-Net. At the present time, 51 of the 70 I-Net connections are active. Stephen Stuart, a Palo Alto resident, played a key role in the roll-out the I-Net. Mr. Stuart provided significant no-fee consulting services in the development of the architecture, engineering, and operation of the I-Net. Also, since 1994, the City and the Palo Alto Unified School District (PAUSD) have received Internet connectivity free of· charge through donations arranged by Mr. Stuart and another Palo Alto resident, Brian Reid, through their affiliations with various local high-tech firms. Mr. Stuart's volunteer service to the City's current non-profit Internet service provider, ISC, was instrumental in expanding the coverage of Internet connectivity to include all the I-Net's school districts and the Media Center. CMR:422:09 Page 1 of5 The JPA members are using eleven I-Net sites for connectivity between and among City Halls, community centers, child development centers, senior centers and police stations at the following locations: Palo Alto: City Hall Menlo Park: Belle Haven Police Substation, Belle Haven Child Development Center, Onetta Harris Community Center, City Hall, Council Chambers East Palo Alto: City Hall, Corporation Yard, Police Department, Senior Center, Housing and Community Services Also connected to the I-Net is the JPA's community access organization, the Media Center. The Media Center is responsible for operating and managing the JP A's local public, education, and governmental (PEG) access channels and facilities. With the Media Center connected to the 1- Net and with each I-Net site connected to the Media Center, the broadcast and video capabilities in the JP A communities have been greatly expanded. Among the heaviest users of the I-Net are the JPA-area schools. The schools utilize the I-Net as their primary telecommunications network. By connecting sites over the I-Net, K-12 educational institutions eliminated leased line telecommunication costs and gained significantly greater bandwidth and network performance. The I-Net is providing new learning tools for students and teachers, enhanced security, and a reliable IP-based phone system. The JPA-area school districts have 40 active I-Net connections as follows: Palo Alto Unified School District (20 connections) Ravenswood City Elementary School District (12 connections) Menlo Park City School District (4 connections) Las Lomitas Elementary School District (3 connections) Sequoia Union High School District (1 connection). On September 29, 2006, the Digital Infrastructure and Video Competition Act of 2006 (DIVCA) was signed into law. The purpose of DIVCA is to create a streamlined process for the granting of cable/video franchises in an effort to foster the rollout of technology, encourage competition and expand customer choice. This new law permanently changed the franchising and regulatory structure for the provision of cable television and other landline multichannel video services in the State of California. Under DIVCA, franchises are now granted by the California Public Utilities Commission rather than"byloc.~1<g2X~fP:!A~I;J.t~.~,DlygArymoved the authority of local government to negotiate cable franchises and provided that I-Net obligations in preexisting local cable franchises (like the JP A's with Comcast) will no longer be enforceable after their expiration dates (July 2010, in the case of the JPA's Franchise Agreement). DISCUSSION For the pa~t five months, staff and JP A representatives have met with Comcast to discuss the continuation of the I-Net after July 2010. During these meetings, Comcast has discussed the two options (I-Net lease and Managed Ethernet Service network) that it plans to make available to jurisdictions with expiring I-Net obligations. Although the JPA will have the option of entering CMR:422:09 Page 2 of5 into lease for the I-Net, the costs will be substantial. On July 16, 2009, the JPA asked Comcast for a quote for the I-Net lease option. Although a formal quote has not yet been received, the following chart provides an estimate of the annual I-Net lease costs (an estimate of $2,200 to $3,300 per month per site). This estimate is based upon preliminary numbers provided by Comcast. I-Net User # Sites Estimated Annual I-Net Cost • City of Palo Alto I $26,400 -$39,600 City of Menlo Park 5 $132,000 -$198,000 City of East Palo Alto 5 $132,000 -$198,000 Palo Alto Unified School District 20 $528,000 -$792,000 Ravenswood City Elementary School District 12 $316,800 -$475,200 Las Lomitas Elementary School 4 $105,600 -$158,400 Menlo Park City School District 3 $79,200 -$118,800 Sequoia Union High School District 1 $26,400 -$39,600 As an alternative to the I-Net lease, Comcast has offered to develop a new Managed Ethernet Service network for each jurisdiction. Comcast has proposed entering into a 3 to 5-year agreement at a charge of $500 to $1,320 per month per site charge depending on the connection speed (100 Mbps to 1 Gbps) and level of JPA participation. Although this option is less costly, it would mean the JPA would have to abandon the I-Net and all the benefits it offers to the JPA- area communities. Benefits such as unlimited broadband capacity, the ability to exchange network traffic freely between jurisdictions, and free Internet service would be lost. In addition to the per-site charge under this alternative, connection equipment would need to be purchased for each site and there would be additional charges for Internet connectivity as access to the 1- Net is essential for the I-Net member organizations. to continue to take advantage of free Internet service provided by the ISC. Finally, under this option, there is no guarantee that Comcast would extend the proposed rates at the end of the 3 to 5-year agreement period. It is important to note that JP A-area schools may be eligible to receive federal E-rate program discounts that would serve to reduce the monthly Managed Ethernet Service network charges. The E-rate program was designed to ensure that schools have affordable access to modern telecommunications and information services and provides discounts of 20 percent to 90 percent for eligible telecommunications services. As part of its meetings with Comcast, JPA representatives let Comcast know that the I-Net provides critical services to JP A members and that vital public safety and community CMR:422:09 Page 3 of5 connectivity will be lost after July 2010 unless Comcast substantially lowers its proposed new I-Net rates. The JPA has emphasized that the loss of I-Net fiber bandwidth will be particularly harmful to the JPA-area schools. For the last several years, technology has been used to accelerate the learning of JP A-area students and give teachers better access to tools that will engage students and accelerate student achievement. The backbone of that plan is the fast bandwidth that the I-Net provides. Not having that fiber backbone will stop progress in its tracks. The loss of the I-Net will be felt in the classrooms and will adversely impact the operating efficiency, and the overall safety at our JPA-area schools. Ultimately, it will result in a widening of the digital divide in the lower-income areas of the JPA. The proposed I-Net pricing options that Comcast has provided exceed the financial means of the members served by the JPA's I-Net. Unfortunately, the discussions with Comcast to date have resulted in little or no forward progress in developing reasonable options that would provide the I-Net participants the ability to continue to use the I-Net at the expiration of the franchise agreement. Because the costs of Comcast's I-Net are largely sunk and have already been largely, if not completely, recouped by Comcast through cable rates charged to JPA residents for nearly ten years, Comcast's proposed I-Net rate demands seem wholly unjustified. In essence, Comcast is seeking to recover its I-Net costs twice, once from its cable subscribers and now, again, from the JP A members and school districts through excessive proposed I-Net charges. On October 16,2009, the JPA sent a letter to Comcast (Attachment A) summarizing its concerns, as follows: • The I-Net provides vital services to the JPA and has enabled JP A-area schools to improve educational opportunities and operate more efficiently. • Comcast's I-Net rate demands exceed the available budgets of the I-Net users and are excessive in light of Comcast's recoupment of its investment costs through rates during the term of the franchise. • Six I-Net sites are currently used for the origination of PEG programming. The JP A has plans to use a number of additional I-Net sites for the origination of PEG programming before July 2010. DIVCA requires Comcast to provide, at no charge to the JP A, all necessary facilities for transmission of PEG programming from PEG insertion points to subscribers. Comcast has failed to acknowledge and accept its DIVCA obligation to continue to provide services from these PEG origination sites free of charge. The letter asks Comcast to explore other options beyond the assessment of new I-Net charges. r In the meantime, the JPA is exploring all possible options for maintaining I-Net services at the lowest possible costs after July 25, 2010. The City will continue to explore alternatives with Comcast and other potential I-Net providers. The City is also reviewing whether the idea of any possible future Fiber Optics Fund broadband connections could serve Palo Alto schools. CMR:422:09 Page 4 of5 PREPARED BY: MELisSA CAVALLO DEPARTMENT HEAD APPROVAL: Director, Administrative Services CITY MANAGER APPRO V AL: ATTACHMENTS: Attachment A: Letter to Comcast dated October 16, 2009 cc: JPA Members Lee Ann Peling, Comcast (" i CMR:422:09 Page 5 of5 . I I I , I Divisions Administration 650.329.2692 650.323.1741 fax Budget 650.329.2260 650.323.1741 fax Infonnation Teclmology 650.329.2182 650.617.3109 fax Real Estate 650.329.2264 650.323.1741 fax Finance 650.329.2264 650.323.1741 fax Acrounting 650.329.2264 650.323.1741 fax Purchasing 650.329.2271 650.3292468 fax Investments 650.329.2362 650.323.8356 fax Revenue Collections 650.320.2317 650.617.3122 fax Parking Citations 650.329.2252 October 16, 2009 Mr. Johnnie Giles Comcast Vice President Government Affairs 12647 Alcosta Blvd. San Ramon, CA 94583 ATTACHMENT A RE: Joint Powers Agency I-Net Dear Mr. Giles: Qty_Qf_P~9_Alto Administrative Services Department Over the past five months, representatives of the cable television Joint Powers Agency (the "JPA") that serves the cities of Palo Alto, East Palo Alto and Menlo Park, the town of Atherton, and portions of Santa Clara and San Mateo counties (the "Members") have met with Comcast representatives to discuss the future of the I-Net after July 2010, when Comcast's current franchise I-Net obligations will expire. Unfortunately, those discussions have resulted in little or no forward progr~ss in developing reasonable options that would provide the Members with the ability to continue to use the I-Net at the expiration of the franchise agreement in July 2010. The JP A and the Members are disappointed and frustrated by Corneas!' s unwillingness to respond meaningfully to the JPA's post-July 2010 I-Net concerns. The JPA's concerns fall into two categories. First, Comcast has failed to recognize and agree to fulfill its clear obligations under the Digital Infrastructure and Video Competition Act ("DIVCA") to continue to provide I-Net capability to all PEG programming origination points, free of charge. Second, Comcast's proposed recurring charges for I-Net sites that are not PEG origination points far exceed the available budgets of the Members and are excessive in light of Comcast's recoupment of its investment costs for those sites during the term of its franchise. 1. DIVCA Requires Comcast to Provide Transmission from all PEG Origination Sites Free of Charge. By law (DIVCA), Comcast is obligated to provide, at no charge to the JPA or the Members, all necessary facilities to the PEG "channel originator" for transmission of PEG programming from PEG programming insertion points to subscribers. Cal. Pub. Util. Code § 5870(h). See also Cal. Pub. UtiI. Code § 5870(a) (holder must provide "sufficient" "capacity on its network" for provision of PEG channels.); § 5870(f) P.O. Box 10250 Palo Alto, CA 94303 Printed with soy-based inks on 100% recycled paper processed without chlorine ("transmission of [PEG] content" is Comcasf s responsibility; PEG content is the JP A's responsibility); & § 5870(g)(l) (JPA is to "provid[e]" PEG programming while Comcast is to provide PEG transmission). The following I-Net sites are used for origination of PEG programming: Media Center, Palo Alto Chambers of the City Council, Menlo Park Community Center/Belle Haven Senior Center, Menlo Park City Hall, Palo Alto City Hall, East Palo Alto District Office, Palo Alto Unified School District ("P AUSD"), Palo Alto The JPA anticipates that the following I-Net sites in East Palo Alto will imminently be used for origination of PEG programming: 4gers Academy, Ravenswood City Elementary School District ("RCSD"), East Palo Alto District Office, RCSD, East Palo Alto The JPA anticipates that the following I-Net sites will be used for· origination of PEG programming before July 2010: . , Atherton Town Hall, Atherton . Menlo Atherton High School, Sequoia Union High School District ("SUHDS "), Atherton Menlo Park District Office and Encinal School, Menlo Park City School District ("MPCSD"), Menlo Park District Office, MPCSD, Menlo Park Hillview School, MPCSD, Menlo Park Oak Knoll School, MPCSD, Menlo Park Las Lomitas District Office, Las Lomitas 'Elementary School District ("LLESDn), Menlo Park La Entrada School, LLESD, Menlo Park Las Lomitas School, LLESD, Menlo Park Police Substation, Menlo Park Belle Haven Child Development Center, Menlo Park Gunn High Schoql, PAUSD, Palo Alto Jordan Middle School, PAUSD, Palo Alto Jane Lathrop Stanford Middle School, PAUSD, Palo Alto Cesar Chavez Academy, RCSD, East Palo Alto Despite its clear DIVCA obligation, Comcast has failed to respond to the JPA's requests that Comcast acknowledge and accept its obligations to continue to provide services from these PEG origination sites free of charge after July 20 I O. The JPA and the Members expect Comc~st to fulfill its DIVCA obligation with respect to these PEG origination sites and again request Comcast's confirmation of that obligation. 2 2. Non-PEG Origination I-Net Sites. In addition to PEG programming origination and delivery, the I-Net provides other vital services to all of the Members whose facilities are connected to it and, in particular, has enabled JPA-area schools to improve educational opportunities and operate more efficiently. The impact of the loss of I-Net capability will be particularly harmful to the JPA-area schools, including the RCSD, which serves the lower-income residents of East Palo Alto. The City of East Palo Alto is very near sea level. As a consequence, copper wire-based services in the community that are located underground are very unreliable. Before the I-Net fiber connections were made available, the Tl lines to the schools would go down often. The Internet and e-mail services at school sites would cease at times for up toa week. When this happened, school principals would have to scramble and use cell phones to receive calls from frantic parents who could not communicate with their child's school. Access to the lPA's fiber-based I-Net for the past several years has changed all of that. In August 2008, thanks to E-rate funding and a grant from Cisco Systems, Inc., the RCSD implemented a Voice-Over-Internet-Protocol ("VOIP") telephone and e911 system for all schools in the district, including charter schools. Every classroom teacher now has a phone and reliable voicemail to enhance' home/school communication, a proven strategy for improving educational outcomes. Without the bandwidth between school sites provided by the I-Net, however, this VOIP system will not work properly. That would have a significant adverse impact on the operating effi?iency, and the overall safety at RCSD schools. In May 2009, the RCSD received a large equipment grant from the Hewlett-Packard Company ("HP") to update the RCSD's server infrastructure and better serve.the needs of students and teachers. This upgrade allows the RCSD to provide secure centralized information storage and backups for teachers and students, and to give teachers and students server-based and online access to electronic textbook resources. The HP grant also funded laptops for the RCSD's middle school teachers to use to prepare lessons, conduct student assessments, and retrieve instructional materials, including videos to enhance student lessons. Thanks to the HP grant, laptop carts are available for the first time this fall, to provide access to online curriculum resources and technology in the classroom for 1,200 RCSD middle school students. ' Without access to the I-Net bandwidth, however, the RCSD students will not be able to access the Internet quickly or reliably, or store their work documents with unfettered access. Likewise, reliable teacher access to online materials cannot happen without the I-Net bandwidth and the fast Internet connection that it provides. The overall budget picture for schools is bleak. The economic situation in the JP A service area i~ no exception. Our schools have recently endured significant staff and program cuts because of the state fiscal crisis and weak economy. The fmancial picture for the coming year is also very grim. More staffing and programmatic cuts are anticipated, and probably at least one school will close. 3 In this very difficult fiscal environment, our schools are still striving to improve the academic perfonnance of our students. The RCSD is identified as a low-performing school district due to scores on state standardized tests. Although test scores have improved each year, the rate of improvement is not fast enough to satisfy No Child Left Behind regulations. The adverse educational impact on our students of not having access to the I-Net fiber bandwidth will be substantial. For the last several years, we have strived to use technology to accelerate the learning of our students and give teachers better access to tools that will engage students and accelerate student achievement. The backbone of that plan is the fast bandwidth that the I-Net provides, and not having it will stop our progress in its tracks. The JPA leadership has met with Comcast to discuss the continuation of the I-Net that has been provided through the local franchise agreement. During these meetings, Comcast presented the proposed new I-Net charges that it plans to impose on JP A jurisdictions if they wish to continue to use the I-Net after July 2010. The proposed I-Net pricing options that Comcast has quoted exceeds the financial means of the Members served by-the JPA's I-Net. To date, Comcast has been unable or unwilling to explore or discuss other options beyond the assessment of its proposed new I-Net charges. Because the costs of Comcast's I-Net are largely sunk and have already been largely, if not completely, recouped by Comcast through cable rates charged to local subscribers for nearly ten years, Comcast's proposed I-Net rate demands seem wholly unjustified. In essence, Comcast is seeking to recover its I-Net costs twice, once from its cable subscribers and now, again, from the JPA members and school districts through excessive proposed I-Net charges. We would like to meet with you to discuss our concerns about this situation and to seek your assistance and input as to what might be done to solve the enormous problems caused by the loss of the I-Net. Sincerely, )~c-~/ Melissa Cavallo Joint Powers Authority Cable Coordinator cc: Lee Ann Peling Nathan Woodard JPAMembers r , 4