HomeMy WebLinkAboutStaff Report 3914
City of Palo Alto (ID # 3914)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/24/2013
City of Palo Alto Page 1
Summary Title: Fiber-to-the-Premise Network Work Plan
Title: Technology and Connected City Committee Recommendation to
Develop Work Plan to Evaluate the Feasibility of Building a Citywide Fiber -to-
the-Premise Network in Palo Alto and Request the City Manager to Appoint a
Community Advisory Committee to Assist Evaluation
From: City Manager
Lead Department: City Manager
Recommendation
Staff recommends that the City Council approve the Technology and Connected City Committee
recommendations to: 1) develop a work plan to evaluate the feasibility of building a citywide
high-speed broadband fiber-to-the-premise network in Palo Alto, and 2) request the City
Manager appoint a Community Advisory Committee to assist in the evaluation.
Background
The Technology and Connected City Committee held its first meeting on May 14, 2013. Staff
provided an overview of the history of the fiber network in Palo Alto. Attachment A provides
the staff speaker notes from the presentation. Attachment B provides the draft minutes from
the Committee meeting. The Committee also discussed development of a work plan to evaluate
the feasibility of building out a citywide fiber-to-the-premise network in Palo Alto, and the
creation of a Citizen Advisory Committee to assist in the evaluation. Staff also provided an
update on the City’s upcoming technology initiatives.
Since the Committee meeting, Vice Mayor Nancy Shepherd, Council Member Liz Kniss and Jim
Fleming from City of Palo Alto Utilities attended the Fiber-to-the-Home Conference (“From
Gigabit Envy to Gigabit Deployed” A Community Toolkit for Building Ultra High-Speed
Networks), in Kansas City, Missouri on May 29 and 30, 2013. Attachment C provides a
whitepaper from the Fiber-to-the-Home Council about how to become a “fiber-friendly”
community, and the Conference summary notes.
City of Palo Alto Page 2
Discussion
The Committee recommended that staff develop a work plan to evaluate the feasibility of
building a citywide high-speed broadband fiber-to-the-premise (FTTP) network in Palo Alto, and
create a Citizen Advisory Committee to assist in the evaluation.
Work Plan to Evaluate Feasibility of City-wide FTTP Network
Despite the fact that staff has not received explicit direction recently from the Council as a
whole on fiber, staff has spent a significant amount of time on exploratory research and
outreach since the late 1990s to develop a plan to build a citywide FTTP network. Previous
initiatives are summarized below. In addition, the discussion at the Council Annual Retreat in
February 2013, the designation of fiber as a priority, and the establishment of the Technology
and Connected City Committee indicates that staff should focus work on the feasibility of a
citywide FTTP network.
In 1999, the City issued a Request for Proposal (RFP) for the “High-Speed Universal
Telecommunications Project.” No viable bids were received.
From 2000 to 2005, a Fiber-to-the-Home (FTTH) trial was conducted at sixty-six (66)
homes in the Community Center neighborhood. The trial proved technical feasibility.
From 2002 to 2004, staff and a consulting firm developed a FTTH business plan. The plan
demonstrated that a FTTH utility could be “economically viable” over a 20-year
construction bond period, assuming the Electric Fund would issue the revenue bonds.
However, upon further legal analysis by the City Attorney, the Electric Utility could not
continue to fund the FTTH project. If bonds were issued to build a citywide FTTH
network, they could not be backed by revenues from City of Palo Alto Utilities (CPAU).
In 2006, an RFP was issued for the “Ultra High-Speed Broadband System Project”, which
resulted in unsuccessful negotiations with a consortium of firms to build a citywide FTTP
network. Negotiations ended in early 2009.
In 2011, staff and a consulting firm developed a two phase “conceptual plan” which
proposed using the Fiber Optics Fund reserve to construct broadband
telecommunications hub sites at the City’s nine (9) electric substations (Phase 1), and
expanding network access from these hub sites to eighty-eight (88) neighborhood
access points or “nodes” (Phase 2). The plan was proposed to establish an economic
incentive for a private FTTP firm to construct the “last mile” of the network to serve
residential and commercial premises.
In 2012, staff and two consultants evaluated a “user-financed” FTTP business model,
which relied on homeowners to pay on a voluntary basis for some or all of the cost to
build out the existing dark fiber network into residential neighborhoods. Based on the
findings of a community survey and a financial analysis, it was determined that a fully
user-financed citywide FTTP system is not possible to achieve. An opt-in FTTP network
could be built using a combination of upfront user fees and City financing; however,
City of Palo Alto Page 3
there is a low probability of the debt being repaid by operating revenues. Ongoing
subsidies would be required, very likely in excess of surpluses in the Fiber Optics Fund
reserve from licensing dark fiber for commercial purposes.
In June 2012, Utilities staff recommended to the Utilities Advisory Commission (UAC) to
conduct a feasibility study to use the Fiber Optics Fund reserve to finance the
construction and operation of a wireless network to leverage and augment the City’s
dark fiber network.
Citizen Advisory Committee
The Committee also recommended that the City Manager appoint a community advisory
Committee to utilize community talent to assist in an advisory capacity to develop the work
plan, and restart the community dialog. In 2007 and 2008 a three member citizens’ committee
was also appointed to participate in an advisory capacity as the City considered a citywide ultra-
high-speed broadband system project. Former Mayor Kishimoto appointed the first two citizens
(Bob Harrington and Andy Poggio) in 2007. The third advisor (Bern Beecham, former Council
Member) was designated in 2008, by former Mayor Klein.
To establish the Citizen Advisory Committee, the City Manager will publicize the formation of
the advisory committee, develop a selection process and criteria, and appoint the members,
considering such factors as size of the committee, expertise/qualifications of the members,
perspective and expectations of outcomes for the committee's work. To date, six members of
the community have expressed interest in serving on an Advisory Committee.
Timeline, Resource Impact, Policy Implications, Environmental Review
The Technology and Connected City Committee will reconvene in early August to review and
consider a work plan to evaluate the feasibility of building a citywide FTTP network in Palo Alto.
It is anticipated that the Council will consider the Committee’s recommendations on the work
plan in September 2013.
Resource Impact
If the work plan is approved by The Technology and Connected City Committee, significant staff
and consulting resources will be required. Staff would plan to return to Council if needed with
a Budget Amendment Ordinance to allocate appropriate staff time and to pay for any necessary
consulting assistance.
Policy Implications
This work plan is consistent with the City Council’s 2013 Council Priority, Technology and the
Connected City.
City of Palo Alto Page 4
Environmental Review
The actions requested in this report do not constitute a project for the purposes of the
California Environmental Quality Act. If the City proceeds with expanding the fiber network and
installs associated equipment to build out a citywide FTTP network, as required by the
California Environmental Quality Act, an environmental assessment will be prepared for the
overall FTTP infrastructure project.
Attachments:
: Attachment A. 5-14-2013 Fiber Presentation(PDF)
: Attachment B. 5-14-2013 Meeting Minutes (DOC)
: Attachment C. Fiber to the Home Council Conference (PDF)
1
Technology and the Connected City
May 14, 2013
Speaker Notes Prepared by Jim Fleming (Management Specialist, City of Palo Alto Utilities)
History of Fiber in Palo Alto
Reasons for Building Fiber System:
The fiber backbone was first conceived in the mid‐1990s when the City developed a telecom
strategy that included building a fiber ring “capable of supporting multiple developers
and/or service providers with significant growth potential.”
In the mid‐1990s, most investor‐owned and public utilities invested in fiber optics to
improve command and control of their utility infrastructure. Many of these fiber networks
typically had excess capacity that could be licensed or leased to third parties.
The original target market for the City’s commercial dark fiber service was Competitive
Local Exchange Carriers (CLECs) that emerged after the passage of the 1996 Telecom Act.
The Telecom Act mandated that competition policy replace monopoly regulation. As a
result, many CLECs were seeking opportunities to use available dark fiber to deliver various
high‐bandwidth telecom services.
o A simple definition of “dark fiber” is unused fiber through which no light is
transmitted and does not carry a signal.
By the late 1990s many CLECs left the market either through mergers with other CLECs or
bankruptcy. The so‐called “dot com bust” also occurred at roughly the same time. As a
result, the anticipated demand for dark fiber in the original target market proved to be
somewhat limited.
Nonetheless, it was evident that a fiber backbone system would be a valuable asset with the
capacity to support the City’s internal communications requirements, IT systems, and
command and control of communications systems for critical City infrastructure such as
utility substations and traffic signals, in addition to providing dark fiber service connections
to a variety of potential commercial users.
System Financing
The fiber system was financed internally by the Electric Enterprise Fund through a 20‐year,
$2 million loan at 0% interest. The funds were used to construct the system and cover
operating expenses. In FY 2008, the fiber optics business completed the loan repayment to
the Electric Enterprise Fund and a separate Fiber Optics Enterprise Fund was established
capable of maintaining its own capital and operating budgets and financial operating
reserve. In FY 2009, a Fiber Optics Enterprise Fund Rate Stabilization Reserve (RSR) was
established.
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
2
System Description
The first phase of the system was constructed in 1996‐97, consisting of 33 route miles. In
1998, the backbone was expanded to 41 route miles passing the majority of the business
parks (e.g. Stanford Research Park) and other commercial properties in town.
Definition of dark fiber: Unused fiber through which no light is transmitted and does not
carry a signal. It is up to the end‐user to install, configure and maintain the electronic
equipment to “light up” or provision the licensed fiber strands. In contrast, traditional
telecommunication service providers only make available certain products within their
service options which are typically described as “managed services.” These services may or
may not adequately meet the high bandwidth requirements of the specific applications
used by the customer.
City Use of the System
The City is highly dependent on the fiber system for communications. The system provides
dark fiber service connections for the following City accounts: IT Infrastructure Services,
Utilities Substations, Utilities Engineering, Public Works, the Water Quality Control Plant
and Community Services (Art Center).
Commercial Dark Fiber Service
The City’s basic business model for commercial dark fiber service is to license dark fiber
connectivity to companies that require large amounts of bandwidth and have the internal
resources to install, configure and maintain the electronic equipment required to “light up”
and provision the fiber strands. By connecting to the City’s system, the customer can:
1. Gain access to their Internet Service Provider (ISP) of choice;
2. Interconnect communications systems or computer networks across multiple
locations in Palo Alto, and also
3. Connect directly to their local and/or long distance carrier of choice with a full
range of communications services.
Many of the City’s commercial dark fiber customers gain access to the Internet through the
Palo Alto Internet Exchange (PAIX, now owned by Equnix). PAIX is a carrier‐neutral
collocation facility that hosts over 70 ISPs at their facility located in downtown Palo Alto.
Customer Base
The City currently licenses dark fiber connections to approximately 80 commercial
customers with approximately 200 separate service connections.
The different categories of commercial dark fiber customers include firms involved in a
variety of technologies, web‐hosting, social media, finance, medical, pharmaceuticals and
R&D. Another small but significant category of commercial customers in terms of total
revenues are telecom service “resellers.” Resellers are telecom companies that license
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
3
large amounts of dark fiber capacity to deliver a variety of broadband, telephony and video
services.1
The backbone system is extended based on demand. Recent extensions include the E.
Meadow Circle area and a project that is currently underway to provide dark fiber service
connections to 18 Palo Alto Unified School District facilities.
What is the value of commercial dark fiber?
The fiber system provides access to affordable dark fiber for a variety of businesses. This
infrastructure enhances the City’s economic development in terms of business attraction
and business retention.
The key benefits to the end‐user includes:
1. Access to bandwidth based on the needs of the business;
2. Optimum return on investment in the electronic gear required to provision or
“light” the fiber;
3. More efficient network management. The end‐user maintains complete control
of protocol, platform and network scalability.
Dark fiber also provides an essential community asset able to support multiple telecom‐
related uses for both wireline and wireless communications including Wi‐Fi, commercial
services and fiber‐to‐the‐premise.
Fiber Optic Fund Reserve
As of the end of fiscal year 2013, the licensing of dark fiber service connections will account for
a fiber fund reserve of $14.5 million, in addition to a separate $1.0 million Emergency Plant
Replacement fund. According to the proposed Fiscal Year 2014 Budget, the fiber reserve is
projected to increase by $2.3 million.
Describe Map of Fiber Optic Backbone (see map attached)
Fiber‐to‐the‐Home
In 1999, the City issued a Request for Proposals (RFP) for the High‐Speed Universal
Telecommunications Project. No viable bids were submitted so the City embarked on the Fiber‐
to‐the‐Home (FTTH) Trial.
FTTH Trial
In 2000, the City Council approved a FTTH trial to determine the feasibility of providing citywide
FTTH access. The trial included 66 residences in the Community Center neighborhood. The
purpose of the trial was to test the concept of fiber‐to‐the‐home. The Council authorized
$680,000 for the trial. The FTTH trial was successful in terms of proving technical feasibility and
lasted until 2005. The trial was not an economic trial; however, when the initial investment and
overhead expenditures were included in the calculation, it was not profitable for the City.
Business Plan
1 Percentage of annual dark fiber license revenues by customer category: City service
connections (27%); Resellers (42%), other commercial customers (31%).
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
4
In 2002, while the FTTH Trial was underway, the Council approved retaining a
telecommunications consultant to develop a FTTH business case. The development of the
business case included a survey of residents to determine potential market interest in the
project. The survey demonstrated interest in the community for a fully built‐out FTTH
system that would provide an alternative to the incumbent broadband providers.
In 2004, the same consultant completed a FTTH business plan. The plan demonstrated that
a FTTH utility could be “economically viable” over a 20‐year construction bond period,
assuming the Electric Fund would issue revenue bonds. However, further legal analysis by
the City Attorney concluded that the Electric Utility could not continue to fund the FTTH
Project. If bonds were issued to build a citywide FTTH network they could not be backed by
revenues from the other utilities.
Citywide Ultra‐High Speed Broadband System Project
In a 2005 Colleagues Memorandum, the Council recommended a revised approach for FTTH
and recommended directing staff to issue an RFP for the construction and operation of a
minimum symmetrical 100 Megabit per second (Mbps) citywide infrastructure providing access
to service to all residential and commercial residents and open to all providers. The first step
was for staff to provide Council with a discussion of legal and financial issues regarding the
issuance of an RFP.
At the Council’s direction in 2006, a Citywide Ultra‐High Speed Broadband System RFP was
issued. The RFP identified several goals for last‐mile broadband network deployment.
These goals included:
1. An “open system” that would promote competition among multiple service
providers;
2. The capability of providing each customer with a minimum bandwidth of 100
Mbps symmetrical service;
3. The provision of “triple‐play” data, video and telephony services;
4. The construction and operation of a citywide network at minimal financial
investment and risk to the City;
5. Eventual City ownership of the network.
As a result of an RFP process in 2007, the Council directed staff to proceed with the
development of an “Ultra High‐Speed Broadband System Business Plan” with the 180
Connect “Consortium.” The consortium included 180 Connect (a design, engineering and
construction firm), PacketFront (a network hardware and software company) and the Royal
Bank of Canada Capital Markets which expressed interest in financing the network’s
construction.
In May of 2008, Axia NetMedia Corp. (a firm based in Calgary, Canada) confirmed its
interest in joining the Consortium and entered the discussion for the purpose of not only
providing the necessary capital to build the network, but also to apply its technical and
management expertise to operate the network, effectively replacing RBC .
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
5
The Consortium proposed the formation and funding of a privately‐held “Special Purpose
Entity” (SPE) as the vehicle for achieving the City’s goal of deploying a “last mile” FTTP
network using an “open access” operating model. The SPE likely would have been a wholly‐
owned subsidiary of Axia NetMedia.
After months of negotiations between the City and the Consortium, Axia NetMedia sent a
letter to the City in March of 2009 stating that the City had effectively rejected their
proposal.
The City was willing to leverage its existing dark fiber assets in a public‐private partnership
with the Consortium, but it was unwilling to raise the amount of capital that the Consortium
wanted from the City to participate. Additionally, with the economic downturn starting in
late 2008, the private parties’ ability to obtain their own financing for the project was
severely impacted and Axia NetMedia withdrew from participation in the project.
In April 2009, Staff recommended to the Council termination of the RFP process for the
Ultra High‐Speed Broadband System Project due to the lack of financial resources of the
Consortium.
In April 2009, Staff recommended that the Council direct staff to pursue American
Reinvestment and Recovery Act (ARRA) federal economic stimulus funds available under the
Department of Commerce, National Telecommunications Information Administration’s
(NTIA) Broadband Technology Opportunities Program (BTOP). The Council directed staff to
pursue economic stimulus funds for the Broadband System Project that included a last mile
network.
When the NTIA announced the first round of funding in July 2009, the City decided not to
submit a grant application under the Program, because it was virtually precluded from
submitting a viable application based on the “key purposes” for a grant which primarily
focused on bringing broadband to unserved and underserved communities. When the
second and final funding round was announced in early 2010, the same criteria or “key
purposes” related to underserved and unserved communities were still in place.
February 11, 2010: Google announced its Fiber for Communities Request for Information
(RFI).
The Council authorized submittal of a response to the RFI. Approximately 1,100 other
communities responded to the RFI.
June 2011:
In June 2011, Staff presented to the Utilities Advisory Commission the findings and
recommendations from two consulting firms retained to evaluate opportunities to expand
the fiber network: The firms were Columbia Telecommunications Corporation (CTC) and
Tellus Venture Associates (TVA).
The CTC report was a response to the Council’s directive to explore the use of the Fiber
Optics Fund reserve to independently proceed with a phased build‐out of the existing fiber
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
6
optic backbone network, which would be the basis for establishing an incentive for a third‐
party FTTP system operator to build‐out the “last mile” network.
The CTC report described a two phase “conceptual plan” that proposed constructing
broadband telecommunications hub sites at the nine (9) electric substations ($1.0 million)
and expanding the network access from the hub sites at the substations to eighty‐eight (88)
neighborhood access points or “nodes” as a potential platform for “last‐mile” FTTP. These
nodes could also support other uses related to wireless communications, including
communications infrastructure for future Smart Grid applications ($5.0 million).
The other report from Tellus Venture Associates provided market research which evaluated
the current coverage, marketing and market potential of the fiber optic backbone network
for the existing commercial dark fiber business. The report also included an assessment of
the residential market for FTTP, which concluded there was no compelling business case for
providing fiber service directly to residences since Palo Alto is already served by two
dominant incumbent providers that enjoy decisive competitive advantages resulting from
economies of scale.
June 2012
In June 2012, staff submitted its findings and recommendations to the UAC regarding an
analysis of an alternative model for citywide Fiber‐to‐the‐Premise (FTTP) which relies on
homeowners paying on a voluntary basis for some or all of the cost to build‐out the existing
dark fiber network into residential neighborhoods. The name of this model is “user‐
financed” FTTP. The staff report presented the results of a customer survey and a financial
analysis report.
The customer survey concluded that although there is interest in the community in FTTP
services from the City, interest in the user‐financed model is very low.
Based on the findings from the survey, the financial analysis concluded that a fully user‐
financed citywide FTTP system is not possible to achieve. An opt‐in FTTP system can be built
using a combination of upfront user fees and City financing; however, there is very little
probability of the debt incurred being repaid through operations. Ongoing subsidies would
be required, very likely in excess of surpluses in the Fiber Optics Fund reserve currently
generated by licensing dark fiber.
Based on the findings from the survey and the consultant’s financial analysis, Staff made
three (3) recommendations to the UAC:
1. Commercial Dark Fiber Service:
To continue the current business model for licensing dark fiber service connections to
commercial customers.
2. Citywide Ultra High‐Speed Broadband System Project:
Discontinue efforts to evaluate and implement phased initiatives to build out the dark fiber
network for residential Fiber‐to‐the‐Premise (FTTP) using the fiber fund reserve.
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
7
3. Municipal Wireless Network:
Initiate an evaluation to determine if the City should use the fiber fund reserve to finance
the construction and operation of a wireless network which leverages and augments the
City’s dark fiber network.
The UAC voted 4‐3 to accept staff’s recommendations.
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
Attachment A. History of Fiber in Palo Alto
Staff Presentation Notes
TECHNOLOGY AND THE CONNECTED CITY
WORKING MINUTES
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Special Meeting
May 14, 2013
Roll Call
Chairperson Kniss called the meeting to order at 3:09 P.M. in the Council
Conference Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Klein, Kniss (Chair), Scharff, Shepherd
Absent:
Oral Communications
None
Agenda Items
1. History of Fiber in Palo Alto
James Keene, City Manager, indicated Agenda Items were meant to be a
survey of technology initiatives in the City.
Council Member Klein referenced an article contained in an email from the
National League of Cities regarding technology.
James Fleming, Management Specialist Utilities, reported the fiber backbone
was first conceived in the mid-1990s when the City developed a telecom
strategy that included building a fiber ring capable of supporting multiple
developers and/or service providers with significant growth potential. In the
mid-1990s, most investor-owned and public utilities invested in fiber optics
to improve command and control of utility infrastructure. Many fiber
networks typically had excess capacity that could be licensed or leased to
third parties. The original target market for the City's commercial fiber
service was competitive local exchange carriers (CLEC). CLECs emerged
after the passage of the 1996 Telecom Act, which mandated a competition
policy rather than monopoly regulation. Dark fiber was unused fiber optics
through which no light was transmitted and which did not carry a signal. By
Attachment B. 5-14-2013 Meeting Minutes
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Technology and the Connected City Special Meeting
Working Minutes 5/14/13
the late-1990s, many CLECs left the market either through mergers or
bankruptcy. A fiber backbone would be a valuable asset with the capacity to
support the City's internal communication requirements, information
technology (IT) systems, and command and control of systems for critical
City infrastructure. The network could provide dark fiber service connections
to a variety of potential users. The system was financed internally by the
Electric Enterprise Fund through a 20-year $2 million loan at 0% interest. In
2008 the fiber optics business completed the loan repayment to the Electric
Enterprise Fund, and a separate Fiber Optic Enterprise Fund was established.
The first phase of the system was constructed in 1996 and 1997 and
consisted of 33 route miles. In 1998, the backbone was expanded to 41
route miles which passed the majority of business parks and commercial
property in the City. The end user was responsible for installing, configuring
and maintaining electronic equipment to provision the licensed fiber strands.
The City was highly dependent on the fiber system for communications. The
City's basic business model was to license dark fiber connectivity to
companies that required large amounts of bandwidth and had the internal
resources to install, configure and maintain the electronic equipment
required to provision the fiber strands. The City licensed dark fiber
connections to approximately 80 commercial customers with approximately
200 separate connections. The backbone system was extended based on
demand, with recent extensions to the East Meadow Circle area and 18 Palo
Alto Unified School District (PAUSD) facilities. The Fiber Optic Reserve Fund
was expected to have a balance of $14.5 million at the end of Fiscal Year
(FY) 2013, and projected to increase by $2.3 million in FY 2014.
Chair Kniss asked if some commercial customers resold fiber service.
Mr. Fleming indicated four or five customers were resellers.
Chair Kniss inquired about the number of residential customers.
Mr. Fleming replied three.
Chair Kniss asked if any apartment buildings were fiber customers.
Mr. Fleming answered no.
Chair Kniss suggested owners of apartment buildings might not be aware of
the fiber network.
Vice Mayor Shepherd inquired about the policy for connecting residential
customers.
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Mr. Fleming explained that the residential customers demonstrated a
business use of some sort. The connection fee was sufficiently high that the
average household could not afford it, particularly if the residence was
located a distance away from the backbone.
Mayor Scharff asked if Staff considered a means to provide fiber to
apartment building owners.
Mr. Fleming reported Staff had not approached residential, multiple dwelling
units. Apartment building owners would need to determine whether they
wished to provide an open access system or wished to directly provide
services.
Mayor Scharff asked how the three residential users utilized their fiber
connections.
Mr. Fleming assumed the fiber connection was used for internet service.
Mayor Scharff inquired about the internet service provider (ISP) for fiber.
Mr. Fleming indicated fiber users most likely connected through Palo Alto
Internet Exchange (PAIX), which provided a choice of ISPs.
Chair Kniss stated many residents were not aware of PAIX.
Council Member Klein inquired about connection charges for a residential
customer.
Mr. Fleming explained the charge depended on the distance from the
backbone.
Council Member Klein inquired about monthly charges for residential
connections.
Mr. Fleming believed they were in the range of a few hundred dollars,
perhaps more.
Council Member Klein requested the amount of the connection charge for a
residential user.
Mr. Fleming reported the minimum connection charge was $615. In 2000
the Council approved a fiber to the home trial to determine the feasibility of
providing City-wide fiber for home access. The trial program indicated
technical feasibility; a 2004 business plan indicated a fiber to the home
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utility could be economically viable. Further legal analysis determined that
the Electric Utility could not fund the fiber to the home project. In 2005 a
colleague's memo recommended a revised approach to fiber to the home,
and Staff provided a discussion of legal and financial issues. In 2007, the
Council directed Staff to proceed with development of an ultra-high speed
broadband system business plan with a consortium of investors.
Negotiations between the consortium and the City broke down in 2008. In
2009, Staff recommended the City apply for grant funds available from the
Federal Government; however, Staff determined the City was not eligible for
funds under program requirements. The City retained two consultants to
evaluate opportunities to expand the fiber network. Their report, presented
in 2011, indicated there was no compelling business case to provide fiber
service directly to residences, because Palo Alto was served by two dominant
providers. In June 2012, Staff presented an alternative model for City-wide
fiber to the premise, whereby homeowners would pay for some or all costs
to build out the existing dark fiber network into residential neighborhoods.
The customer survey concluded that the community was interested in fiber
to the premise services, but interest in the user-financed model was low.
Financial analysis of the model determined user-financed fiber to the
premise system could not be achieved. Subsequently, Staff recommended
the Utilities Advisory Commission (UAC) : 1) continue the current business
model for licensing dark fiber service; 2) discontinue efforts to implement
dark fiber network for residential fiber to the premise; and 3) initiate an
evaluation to determine if the City should use the Fiber Fund Reserve to
finance the construction and operation of a wireless system which leveraged
and augmented the dark fiber network. The UAC voted 4-3 to accept those
recommendations.
James Cook, UAC Chairman, reported the UAC was concerned about flaws in
the study and the lack of direction from the Council and community. The
split vote was an indication of the UAC's concerns.
Asher Waldfogel, UAC Commissioner, indicated the UAC felt the study did
not include all the latest thinking. Dramatic changes in technology and
equipment in the last few years could make fiber to the premises feasible.
Mr. Cook felt the UAC was frustrated in that the City had this infrastructure
and Reserve Fund but no information as to how to use it to move forward.
Chair Kniss felt Palo Alto should have the ability to connect to its citizens.
Jonathan Reichental, Chief Information Officer, believed the future of
America was a connected country through broadband access.
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Chair Kniss stated the City's goal was connectivity.
Vice Mayor Shepherd requested an explanation of the term "last mile."
Mr. Fleming reported the last mile was the distance from an access point to
an individual premise.
Vice Mayor Shepherd inquired about splice points.
Mr. Fleming indicated they were network connections.
Vice Mayor Shepherd understood that homeowners could not tap into fiber
optic cable; they had to connect via an access point.
Mr. Fleming added that homeowners needed electronic equipment to utilize
fiber.
Vice Mayor Shepherd asked if undergrounded utilities contained fiber.
Mr. Fleming reported fiber was underground and aerial at different points in
the system.
Vice Mayor Shepherd inquired whether fiber was included in undergrounded
utilities.
Mr. Fleming felt few if any residential neighborhoods contained usable
conduit.
Vice Mayor Shepherd asked why the conduit was not usable.
Mr. Fleming suggested it could be full or old.
Tomm Marshall, Assistant Director of Utilities, reported fiber rings for
commercial services were in place. Spare conduit in most undergrounding
areas could be used for fiber; however, that could require reconfiguration of
existing conduit systems.
Mr. Keene inquired about the amount of fiber located underground versus
above ground if the City became fully connected.
Mr. Marshall indicated most residential neighborhoods were still overhead;
therefore, the majority of fiber would be located overhead.
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Chair Kniss added Chattanooga, Tennessee's fiber was all overhead.
Apparently either method worked well,
Mr. Marshall believed undergrounding was not the issue for providing fiber
service. Fiber service was not set up for residential customers.
Vice Mayor Shepherd requested a copy of Staff's presentation.
2. Present Status of the Field
i. Changes Since Palo Alto’s Last Effort
ii. Google’s Impact
Chair Kniss indicated this Agenda item was covered in the previous
discussion.
3. Preliminary Development of Work Plan and Schedule
James Keene, City Manager, reported Staff was conducting exploratory
research and outreach. By the next meeting, Staff could provide an outline
related to a schedule; however, the specific functions of a work plan would
be informed by directives to Staff.
4. Initial Steps
i. Kansas City Conference
ii. Networking
Chair Kniss announced she, Vice Mayor Shepherd and Mr. Fleming would
attend the fiber conference in Kansas City at the end of May.
Mr. Fleming noted the conference was sponsored by the Fiber to the Home
Council.
Chair Kniss added the conference would be held May 28, 29 and 30, 2013.
5. Creation of a Citizen Advisory Committee
Chair Kniss suggested the City Manager appoint and work with a Citizen
Advisory Committee.
James Keene, City Manager, felt the Council wanted to implement a citizen
committee in order to utilize community talent and restart community
dialog.
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MOTION: Mayor Scharff moved, seconded by Chair Kniss to request the
City Manager form a Citizen Committee.
MOTION PASSED: 4-0
Chair Kniss believed it was unusual for a city to have dark fiber in place and
to make money on it.
Council Member Klein recalled that one of the issues in negotiating with the
consortium in 2006 was risk and financial requirements. The City's financial
leverage changed since those discussions.
Chair Kniss asked how Staff knew fiber rates for commercial customers were
competitive, and if the City was one of the first cities to have dark fiber.
Mr. Fleming reported several cities in California had dark fiber, because
utilities needed fiber for command and control of infrastructure. Some cities
were aggressive about licensing dark fiber, but none of the cities provided
fiber to the residential market.
Chair Kniss requested Staff provide information regarding actions taken by
cities similar to Palo Alto.
Mr. Fleming indicated some cities leveraged dark fiber to build Wi-Fi
systems.
Mayor Scharff inquired about the program San Leandro Lit.
Mr. Fleming explained Lit San Leandro was a partnership between a software
development company and the City of San Leandro. The city allowed OSI
Soft to use existing conduit to run fiber in commercial areas. The private
company was driving the partnership, but the city was benefitting through
use of the fiber.
6. Rollout of Palo Alto 311
Heard after item 7
Jonathan Reichental, Chief Information Officer, reported the phone number
311 was aligned with government services. With Palo Alto 311, the public
could contact City services through email, calls, text, and Facebook, and the
City could provide information to the public. Services through Palo Alto 311
would relate to the Public Works Department beginning June 1, 2013. The
community would know when City Staff was dispatched and when the
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problem was resolved. Location coordinates would be placed on photos
submitted for service through a smart phone.
James Keene, City Manager, added that Staff could track and combine
multiple calls for the same issue such that Staff would respond only once.
Mr. Reichental indicated additional services would be added over time. In
alignment with the City's open data and government transparency policy,
data collected from Palo Alto 311 would be published in the open data
platform.
Vice Mayor Shepherd inquired whether phone numbers would be included in
the public data.
Mr. Reichental noted some items of information were protected.
Mayor Scharff inquired whether a picture taken through the 311 application
would automatically be sent to the City with a service request.
Mr. Reichental replied yes.
Mayor Scharff reported the 311 application had a calendar, a library catalog,
and could download e-books. He inquired about users providing feedback.
Mr. Reichental indicated the application itself could provide feedback. That
information would go to a team working on improvements.
Council Member Klein asked if neighboring cities were using similar
applications.
Mr. Reichental stated Mountain View utilized a 311 application.
Council Member Klein inquired about the length of time Mountain View had
used an application.
Mr. Reichental indicated more than 1 1/2 years.
Council Member Klein inquired about plans to notify residents about Palo Alto
311.
Mr. Reichental stated the application would be launched the same day as the
Hackathon with a press release and a number of marketing promotions.
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7. Hackathon on June 1, 2013
Heard prior to item 6
Jonathan Reichental, Chief Information Officer, reported the national day of
civic hacking would occur June 1 and 2, 2013. The event was designed to
connect government and community to address community needs. Key
aspects were commitment to the principles of transparency, participation
and collaboration, government interest in open data, partnership with the
community to address community needs, and continued and increased
emphasis on the promotion of science, technology, engineering, art and
math (STEAM). Palo Alto's event was a festival for the entire family and
community with activities geared toward STEAM.
Chair Kniss asked how participants could register for the Hackathon.
Mr. Reichental noted the event was free with no registration required.
Lytton Plaza would be the epicenter beginning at 11:00 A.M. Three goals for
the event were: 1) align with White House and federal agencies; 2) fun
event for community; and 3) join civic solvers with civic problems. Staff
advertised in local newspapers and engaged social media. In addition,
private supporters were utilizing their networks to spread the word.
8. Upcoming City Technology Initiatives
Jonathan Reichental, Chief Information Officer would present the three-year
Information Technology strategy to the Council on May 20, 2013.
Future Meetings and Agendas
James Keene, City Manager, requested parties interested in serving on the
advisory committee contact him or Sheila Tucker.
Chair Kniss encouraged public attendance at the May 20, 2013 Council
meeting. The next meeting would be scheduled for mid- to late-summer.
Mayor Scharff suggested Staff prepare name tags and places for liaisons.
ADJOURNMENT: Meeting adjourned at 4:38 P.M.
Conference Summary Notes
1
Fiber‐to‐the‐Home Council Conference
“From Gigabit Envy to Gigabit Deployed” (A Community Toolkit for Building Ultra
High‐Speed Networks)
Location: Kansas City, Missouri
May 29 & 30, 2013
Conference attendees from the City of Palo Alto:
Vice Mayor Nancy Shepherd, Council Member Liz Kniss and Jim Fleming (staff, City of
Palo Alto Utilities).
Conference summary prepared by Jim Fleming.
Summary of conference workshops and other materials distributed:
FTTH Council Recommendations for “Becoming a Fiber‐Friendly Community”
(Regulatory and infrastructure actions that can drive deployments). See attached
summary of recommendations and FTTH Council whitepaper.
Workshop #1: Why do we need so much bandwidth?
Companies like Netflix, Amazon and Wal‐Mart are offering feature‐length movies for
download. More people are looking to upload their own home movies into emails or
web pages. Consumer electronics companies are coming out with devices that
connect televisions to the Internet. High‐definition video is fast becoming the state‐
of‐the‐art, and one high definition movie takes up as much bandwidth as 35,000
web pages.
“Cloud computing” applications are now available for word processing, emailing,
automated remote file backup, and a host of business and personal services. All of
these applications – and many others we haven’t even dreamed of yet – are going to
require much greater bandwidth than what is generally available today, even from
“broadband” providers.
The explosion in online video is driving today's increases in bandwidth demand.
Consumer video traffic is driving bandwidth requirements.
There are a wide range of online applications now in development that are likely to
add to bandwidth demands in the near future (e.g. telemedicine, the emergence of
sensor applications).
Other services, such as distance learning and remote energy management through
fiber‐enabled "smart grid” systems, are also expected to expand considerably over
the next several years, adding to bandwidth demands.
Workshop #2: Emerging Private Network Applications
David Eckell from Corning Cable Systems:
Conference Summary Notes
2
76% of bandwidth stays within the building.
Public Cloud vs. Private Cloud
Multimode fiber is the most economical path to 4G and 100 gigabit inside the
enterprise.
Michael Fisher from Zhone Technologies:
Zhone is the top FTTx supplier.
“Don’t confuse bandwidth with Ethernet ports.”
Keynote Address
Milo Medin (Vice President, Access Services, Google Fiber)
Summary of article written by Marguerite Reardon from CNET regarding Medin’s
address (Google exec sees Google Fiber as a ‘moneymaker’, May 30, 2013)
http://newsle.com/article/0/77167090/
Google is in it to win it when it comes to building fiber broadband networks. Despite
speculation to the contrary, Google sees its Google Fiber broadband business as a
moneymaker, and not just an overpriced test network.
The network in Kansas City, which delivers 1Gbps in downloads and uploads to users and
also comes with a bundled TV service that operates entirely over Google's fiber network,
was first seen as an experimental network to test new services and advertising models.
"We thought a handful of cities would say they were interested," Medin said. "Then we saw
that 1,100 communities replied. No one at the time thought there was a real business here.
But that changed when we saw the interest."
Google offers only two tiers of service for its residential broadband service: a 1Gbps service
for $70 a month and a 5Mbps service that is free with a $300 fiber installation fee that can
be paid for over two years. While the 1Gbps service is slightly higher than the $40 to $50
most consumers pay each month for broadband, it's still a better value.
Medin offered some insight into how Google will eventually be able to make money from
this deployment and other fiber cities in the future. The key is keeping costs of deploying
the network as low as possible. Contrary to what other infrastructure providers have done
in the past, Google has not asked for any funds from the government to subsidize the cost of
its network nor has it sought out attractive tax breaks.
Specifically, Google asked the city of Kansas City to dedicate construction inspectors to the
Google Fiber project so that the inspections the city requires on a regular basis could be
done quickly, which saves Google time and money during the construction phase. It also
asked to co‐locate the fiber with any city owned conduit, so that it didn't have to tear up
streets unnecessarily. And the company worked with utilities to make sure that new poles
that go up offer space for new fiber connections to be strung.
TV is a key component: Building the network has not been without its challenges. The
biggest headache thus far in deploying Google Fiber has been offering its TV service. While
Conference Summary Notes
3
Google decided not to offer telephone service as part of a triple play because it was too
costly and added little value to the package, Medin said a TV service was a must in attracting
residential customers. But offering this service has also created the most challenges for the
company and has also cost it the most money.
Google Fiber expansion: Google has been so pleased with the Kansas City deployment that
it's looking to expand. Google said it would soon offer its service in metro areas in Missouri
and Kansas outside of Kansas City. And the company has also announced two more Google
Fiber cities. It's building a network in Austin, Texas, and it has taken over the fiber network
in Provo, Utah.
In response to a question from an audience member (note: question from Council Member
Liz Kniss) about why Google has not built a network in its home state of California, Medin
was blunt. He said that Google would love to bring fiber and 1Gbps broadband speeds to its
employees and other Californians. But he said that in general California has many challenges
that would make it too costly to build a fiber network there. He said he hopes that over
time, the rules will change and California will become a more hospitable place for fiber
networks. "I have to tell you that it's really easy to build a network in Kansas City," he said,
"It's easy in Missouri; it's easy in Kansas, and it's easy in Texas. Actions have consequences. I
would love to find a way to make it work in California."
Other comments:
A FTTH network needs to have scale for transport services in order to make an “open
access” network model work.
In general, open access doesn’t work in the U.S. Works in Europe for a variety of reasons.
With an open access network presumably there are several ISPs available to the customer,
but there isn’t a “coherent offer” that’s attractive to the customer. Makes customer
acquisition difficult.
In a retail FTTH model, the operator cannot “shortchange” customer service and marketing.
Workshop #3 (How we did it and what it has meant: Lessons from service provider
leaders):
Review of FTTH projects by Gigabit Squared, LUS Fiber in Lafayette, Louisiana and two
rural telephone cooperatives.
Gigabit Squared offers broadband facilities services to help communities and
broadband providers to implement sustainable digital service strategies and
business models. Provide operators and communities with the expertise
required to discover, transform and build digital broadband capacity for civic
transformation and competitiveness. Projects in Chicago and Seattle.
LUS Fiber is a municipally owned subsidiary of Lafayette Utilities System
providing cable TV, broadband Internet and telephone services services to the
citizens of Lafayette, Louisiana. It is notable for being the first municipally owned
company providing Fiber‐to‐the‐Home services in the state of Louisiana, and one
of the first municipally owned FTTH companies in the country.
Rural telephone cooperatives are building FTTH, because their landline
telephone business is eroding and they need to diversify services.
Conference Summary Notes
4
Workshop #4: Creating the business plan
Moderator: Christopher Mitchell, Director, Telecommunications as Commons Initiative,
Institute for Local Self‐Reliance.
John George, Director, OFS Systems and Application Engineering:
Average cost to pass home: $700 (but dependent on housing density)
Average cost to connect home: $500‐$600 (more if an underground lateral
extension is required).
Streamline rights‐of‐way process, pole attachments, permitting and make‐ready.
Locate and leverage conduit/duct for fiber installation.
o Waive ROW fees and permitting fees.
Providing video content is an issue (retransmission consent agreements with
broadcast stations and high cost of cable TV programming are big issues for small
operators).
Consider “over‐the‐top” instead of usual model of providing channel line‐up with
broadcast, cable and video‐on‐demand. Christopher Mitchell commented that it’s
too early to tell if the “broadband‐only” service model works, but should look
toward City of Longmont, Colorado project as a potential model.
FTTH network operating expense is ~20% lower than other technologies.
Optimize network design (each community has different benchmarks).
How to determine how much a network would cost:
o Perform a preliminary assessment
o Housing density
o Ratio of underground to aerial construction
Note: Christopher Mitchell commented that correct forecasting and modeling of “take
rates” is essential for both residential and business customers.
Don’t need as many techs to operate an all‐fiber plant. Reduces OPEX, because
operator doesn’t need as many techs. Trouble calls on fiber near 0.
Workshop #5 (Regulatory Considerations in the Business Model)
Jim Baller (President, The Baller Law Group)
Conference Summary Notes
5
For any broadband project it is important for the operator to understand its
obligations under the Universal Service Fund.1
FCC refused to ban exclusive wiring and marketing agreements for Multiple Dwelling
Units (MDUs).
FCC rules on a case‐by‐case basis on exclusive programming contracts…this was a
change.
Litigation will be coming soon on the “level playing field” issue.
There are regulatory incentives for the expansion of broadband (e.g. the federal E‐
rate Program for schools and libraries).
Brand X Decision: National Cable & Telecommunications Association et al. v. Brand
X Internet Services et al., 545 U.S. 967 (2005), is a United States Supreme Court case
in which the Court declared in a 6‐3 decision that a cable Internet provider is an
"information service," and not a "telecommunications service" and as such
competing internet service providers, like Brand X, were denied access to the cable
and phone wires to provide home users with competing Internet services.
Workshop #7: Issuing an RFP.
Scott Bowles, President of Spectrum Engineering Corp.
RFP processes are usually subject to state sunshine laws.
Does not recommend a public process for establishing tariffs due to competitive
interest.
1Universal Service Fund was created by the United States Federal Communications Commission (FCC) in
1997 to meet Congressional universal service goals as mandated by the Telecommunications Act of 1996.
The 1996 Act states that all providers of telecommunications services should contribute to federal universal
service in some equitable and nondiscriminatory manner; there should be specific, predictable, and sufficient
Federal and State mechanisms to preserve and advance universal service; all schools, classrooms, health
care providers, and libraries should, generally, have access to advanced telecommunications services; and
finally, that the Federal-State Joint Board and the FCC should determine those other principles that,
consistent with the 1996 Act, are necessary to protect the public interest. As of the third quarter of 2012, the
USF fee, which changes quarterly, equals 15.7 percent of a telecom company's interstate end-user
revenues. On October 27, 2011, the FCC approved a six-year transfer process that would transition money
from the Universal Service Fund High-Cost Program to a new $4.5 billion a year Connect America
Fund for broadband Internet expansion, effectively putting an end to the USF High-Cost Fund by 2018.
Conference Summary Notes
6
While writing RFP establish funding sources and mechanisms.
Publish an RFI first. Facilitates getting “free knowledge” from responding vendors.
There’s less freedom if an RFP is done first.
RFP needs a quality‐based selection process. Establish a scoring method.
Build in economic development criteria in RFP.
Key elements of an RFP:
o Detailed network background with overview about what it would include.
Examples: retail broadband services with a guaranteed sustained 1 Gbps
dedicated symmetrical transmission to support voice, data and video services.
o Type of FTTP architecture
o Homes passed.
o Rollout strategy (example: build on a “demand driven basis”).
o Define end‐users: residential, small and medium enterprises, etc.
o Describe existing assets: fiber, conduit, rights‐of‐way, pole attachment rights,
space and power. Define who owns and controls and has access.
o Existing contracts for services and assistance in identifying and generating
institutional and enterprise demand.
o Retail marketing assistance.
o Expedited permitting and inspections.
o Relationships with vendors.
o Description of services sought. Example: seeking a vendor to design, build,
install, own operate and manage a complete turnkey high‐speed
communications network within the service area.
Conference Summary Notes
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o Description of services sought: RFP does not propose a specific technology,
but expect that most potential vendors will propose Fiber‐to‐the‐home
Active Ethernet, GPON and/or WDM/PON technologies to provide gigabit
service to households, businesses and institutions in service area.
o Vendor will be recommended to develop and provide retail services.
o Scope of Work: Network requirements, other services of the network, public
safety services, retail/local services on the network, community services on
the network.
o Vendor responses and evaluation: technology proposed, service offerings,
rollout strategy, roles and responsibilities, financial projects.
o Breakdown of project tasks and components. Breakdown of biddable
components.
o Project schedule.
o Vendor qualifications.
o Administrative issues.
o Proposal format and certification.
o Project calendar.
o Proposal due date and submission.
o Process and criteria for evaluation of proposals
o Clarification of proposals.
o Negotiation and execution of contracts.
o Use of subcontractors.
o Other: applicable statutes, errors and omissions, ownership and
confidentiality.
Conference Summary Notes
8