HomeMy WebLinkAboutStaff Report 2604-6221CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, May 11, 2026
Council Chambers & Hybrid
4:30 PM
Agenda Item
A.Informational Update on the Palo Alto Dark Fiber Expansion Plan and Fiber-to-the-
Premises
City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Utilities
Meeting Date: May 11, 2026
Report #:2604-6221
TITLE
Informational Update on the Palo Alto Dark Fiber Expansion Plan and Fiber-to-the-Premises
RECOMMENDATION
This report is for informational purposes only; no Council action is requested.
EXECUTIVE SUMMARY
This update summarizes construction milestones and program activities of the City-owned fiber
backbone expansion (funded in the Fiber Optic Network System Rebuid CIP) and Fiber-to-the-
Premises (FTTP) pilot. The City’s fiber network has proven to be a valuable investment in
providing communication and data needs for utility facilities, public safety, City departments,
and community centers. In addition, the City’s dark fiber licensing business, which serves
commercial and institutional customers, has been successful by enabling customers to meet
their bandwidth and data transmission requirements and raised over $30 million in reserves for
fiber backbone expansion.
Construction of the FTTP service infrastructure to launch service to a pilot area is complete. The
new fiber hut at Colorado Substation is energized; fiber is spliced and connected back to
Equinix; and networking equipment is installed. In the pilot area, aerial construction is
complete; fiber distribution cabinets are deployed and active; and multiport service terminals
are attached to poles and tested. After weather-related delays earlier this year, final end-to-
end system testing is completed. Activation of 20 or more early adopters in the pilot area is
targeted by the end of June.
These early adopters will help staff validate contractor installation processes, service activation,
customer service workflows, and network support. Staff will return to the Utilities Advisory
Commission (UAC) and Council with early pilot service results, including customer, operational,
and financial metrics, to help inform recommendations of the next phase(s) of the FTTP.
Three key attributes to offering Palo Alto Fiber include offering the only Palo Alto-based
internet service, owned and operated by the City, with transparency and accountability
customers can rely on as a City service; local, professional and responsive customer service;
and providing the community another internet option which would increase competition and
lower rates amongst the internet providers.
BACKGROUND
1). Included in the Council’s
motion was to a) maximize number of homes and businesses reached; b) consider promotional
rates to increase subscriptions (aka ”take rate”); c) define leading indicators and metrics to
determine success; and d) recommend Council accelerate expansion if metrics are positive,
including a potential bond to streamline construction and compress construction time as much
as feasible. The City’s fiber optic backbone network was constructed in the mid-1990s. The
estimated useful life of fiber plant is typically 30 to 40 years. Rebuilding and expanding the fiber
backbone is essential to maintaining and improving network reliability and security, increasing
network coverage and capacity for City departments, commercial dark fiber customers, FTTP,
and supporting some “smart city” initiatives for Information Technology, Office of Emergency
Services, Public Safety, Public Works, Transportation and Utilities. The FTTP pilot is intended to
test the City’s readiness and viability to provide a competitively priced, local, high-speed
internet option. Having other available internet service may reduce overall prices in Palo Alto
and enhance customer experience.
ANALYSIS
1 City Council, December 19, 2022; Staff Report #14800:
https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-
cmrs/2022/12-19-2022-id-14800.pdf
As staff has advanced the pilot, one key lesson learned has been that fiber deployment does
not generate cost efficiencies when coupled with grid mod work in all areas. While there are
still opportunities to coordinate where beneficial, staff learned to better identify strategic areas
for alignment, such as selected undergrounding areas. Staff is actively identifying opportunities
to serve new multifamily residential developments because of lower and shared construction
costs.
FISCAL/RESOURCE IMPACT
3). Through Council authorization through the budget process,
approximately, $5.5 million of $20 million was spent for the pilot which is a subset of phase 1
including aerial construction, pole make ready, fiber hut, reinforced foundation for the hut,
networking equipment, data center, and system applications. $3 million of the $5.5 million are
3Fiscal Year 2025 Annual Comprehensive Financial Report:
https://www.paloalto.gov/files/assets/public/v/1/administrative-services/financial-reporting/annual-
comprehensive-financial-reports-acfr/current-2011-acfrs/city-of-palo-alto-acfr-fye-06.30.2025-final-secured.pdf
one-time investment costs (i.e. fiber hut, data center, networking equipment) for FTTP pilot and
future expansion. Additionally, the FY 2026-2027 proposed budget was built based on this
current status update.
STAKEHOLDER ENGAGEMENT
5). UAC recognized a substantial portion of the fiber funds
are being used to enhance the fiber backbone. Enhancing the fiber backbone will happen
regardless of FTTP being offered. The goals of the FTTP pilot are technical feasibility,
operational efficiency, customer satisfaction, and internet pricing. UAC requested staff to
return to them a few months after FTTP is launched with take rate, financial analysis, and other
data metrics from the pilot to assess the business plan and financial viability of FTTP.
6). The rate structure includes a maximum price and allows
flexibility for setting standard and promotional rates to remain competitive for Phase 1
customers. Staff expects to continue stakeholder coordination through regular UAC and Council
updates and ongoing public engagement as pilot data becomes available.
ENVIRONMENTAL REVIEW
7).
APPROVED BY:
5 UAC Meeting January 7, 2026; Staff Report #2511-5445:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=da34516b-4f8e-4af9-8bb6-6ea10ec1f235
6 Council Meeting June 16, 2025; Staff Report #2411-3776:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=35104f06-6925-4fe3-89c7-b0e53e6eec42
7 https://www.paloalto.gov/files/assets/public/v/1/city-manager/communications-office/palo-alto-fiber/mnd-
final-docs/final-initial-study-mitigated-negative-declaration.pdf