HomeMy WebLinkAbout2001-11-19 City Council (4)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:NOVEMBER 19, 2001 CMR:410:01
SUBJECT:FIBER TO THE HOME TRIAL UPDATE
This is an informational report and no Council action is required.
BACKGROUND
On April 5, 1999, the City Council authorized staff to proceed with a fiber to the home
(FTTH) trial, delivering Internet access services to approximately seventy customers in
the Community Center Neighborhood. On May 10, 1999, Council adopted a Budget
Amendment Ordinance (CMR:228-99) for $380,000 and created the FTTH Capital
Improvement Pro~am (CIP #9916). Subsequently, several request for proposals (RFP)
attempts yielded no proposals to complete the project within the budgeted amount.
Therefore, on November 13, 2000, Council accepted staff’s recommendation to make the
following changes to the project:
1.Increase the construction budget for the project to $668,00.0 and allow staff to
complete the construction in-house.
2.Expand the scope ’Of the trial beyond the Internet to other services, including
video, telephony and other digital services in order to better understand the
revenue, and costs to finance a citywide FTTH network.
3.Charge participants a nominal fee for the services provided.
4.Allow staff to look for partners to deliver new services and demonstrate new
technologies.
In that report, staff indicated it had the following goals:
1. Evaluate construction techniques and determine the feasibility and cost of a
citywide fiber network.
2.Determine if the fiber network can be operated reliably and cost effectively..
3.Determine customer expectations and measure their satisfaction with the
services.
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4. Test new services that could be supported over the fiber network.
5. Develop a business case, business plan, and marketing plan for a citywide fiber
network.
6. Determine financial feasibility and possible funding methods.
Subsequently, an additional $400,000 was budgeted to develop the business case,
business plan, and marketing plan and other analysis work required to make an informed
decision about a citywide build out.
DISCUSSION
Since November 2000, the following significant events and issues have developed related
to the FTTH trial:
In October, the construction of the FTTH network was completed, within budget for
approximately $660,000.
The .City of Palo Alto has signed a partnership contract with Marconi
Communications, whereby Marconi has dedicated networking equipment, installation,
training of Utilities Department staff, and support for the duration of the trial. The
Marconi equipment was installed in September. The Marconi equipment supports
three telecommunication revenue sources: phone, video, and Internet services.
Staff has successfully completed an RFP for services and contracts have been
awarded for Internet, phone and customer support services.
A FTTH Advisory Team has been formed to. review .the FTTH build-out planning
process and to advise staff regarding the business case analysis. The team consists of:
the Utility Advisory Commission (UAC) liaison, a Council member, the Assistant
City Manager, the Director of Utilities, an active FTTH participant and the Utilities
Telecom Manager.
Local phone service is being provided at no cost to FTTH participants. Participants
maintain their current phone so that they are not reliant on the experimental service
for emergency calls. If the City were to charge for the service, many participants
would forgo’ the service rather than pay double phone fees. Also, operating on
PacBell information, the City can avoid competitive local exchange carrier (CLEC)
license issues by not charging for the service.
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Staff has set the FTTH participant fee at $85 per month. This is the highest fee which
had been suggested in earlier contracts with the participants and it covers the cost of
the internet service plus an additional $18 per month. Participants will be expected to
pay for any additional services, including their own long distance telephone and video
fees. Participants will be expected to sign a participant contract.
The video offer in response to the RFP was declared by staff to be non-responsive
since it did not meet the conditions of the RFP. Staff has done additional research
into video business models. The most cost effective method to demonstrate video Over
the fiber will be to deliver a satellite television service over fiber. This can be done for
less than $30,000 and within the trial budget. Other alternatives would require-up to a
million dollars in equipment and are prohibitive for the trial. Staff is working with
one vendor of these services to come to an agreement to accomplish this. FTTH
participants wishing to receive this service will be billed directly by the vendor. This
model is only being used to expedite the trial. Other options will be considered in a
citywide plan.
Video services provided through the FTTH trial will substantially comply with the
same conditions for existing franchise holders within the FTTH trial area. Participants
will pay a fee to the City equivalent to the franchise fee, approximately $5,000,
service will be provided to public buildings within the trial area, and the public
education and government (PEG) channels will be provided in conjunction with the
trial video service.
PREPARED BY:
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
BLAKE HEITZMAN
Manager, Utilities Telecom
(~ctor of Utilities
Assistant City Manager
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