Palo Alto Weekly

News - December 3, 2010

Palo Alto eyes expansion of fiber network

While city waits for Google's announcement on a citywide fiber project, staff considers less ambitious options

by Gennady Sheyner

There's a chance that Palo Alto's dream of a citywide ultra high-speed broadband network will come true later this month, when Google announces which community will host its highly coveted Google Fiber for Communities project.

But then again, with hundreds of other cities from Avon, Conn., to Walla Walla, Wash. vying for the Google prize, the city isn't holding its breath. Instead, Palo Alto officials are busily exploring other ways to extend and "light up" the city's existing dark fiber backbone and bring high-speed Internet access to more local customers.

In the next two months, the city plans to receive the results of two different studies evaluating the potential market for a municipal fiber system and ways to attract private investment dollars to the project. The city's Utilities Advisory Commission discussed the effort at its Wednesday night meeting and lauded staff's effort to explore an expansion of the fiber network.

The major question staff is wrestling with now is just how big of an expansion the city can handle. The existing 41-mile fiber network, which has 59 customers and 154 licensed connections, has been an economic bonanza, bringing the city about $3 million in annual fees and roughly $2 million in profits. At the Wednesday meeting, Commission Chair Asher Waldfogel called the fiber ring a "phenomenal asset for the city."

But while staff is enthusiastic about upgrading the system and expanding it to other major commercial and industrial customers, the road to a citywide broadband network is fraught with risks and challenges, the Utilities Department's Management Specialist Jim Fleming told the commission.

The broadband field is evolving rapidly, Fleming said, and remains highly competitive. Companies such as AT&T and Comcast offer their own high-speed Internet services, often through lucrative "triple play" packages (which feature voice, video and data services) and would be loath to lose market share to a municipal fiber system.

"It's a high-risk business," Fleming said. "The competitive landscape is getting more treacherous."

Nevertheless, the number of municipal "Fiber to the Premise" networks (which offer citywide Internet access) has been growing nationwide. Fleming pointed to a June 2010 report in "Broadband Properties" magazine that said the number of such systems in the United States rose from 66 to 88 between 2008 and June 2010. These communities use all sorts of different business models, though in most cases they are located in areas that are underserved by existing telecommunication companies. Some communities have done well, while others less so, Fleming said.

"Every community is different, and you have to be mindful of the competitive landscape," Fleming told the commission. "You may have a very weak cable provider that's easy to go up against, or a very strong incumbent cable customer who will not stand still when you take their customers away."

In the past, cable providers have used legal means to try to stop municipal fiber projects.

Fleming also wrote in a report that reaction to such projects from communities has been mixed, with supporters viewing them as "essential infrastructure for a community's long-term economic survival" and opponents seeing them as "evidence of government overreaching by entering into a business best left to the incumbent carriers and other private-sector telecom companies."

In tech-savvy Palo Alto, the idea of spreading ultra high-speed Internet access to the masses has been buzzing around City Hall for about 15 years. In 2008, the city entered into a partnership with a consortium of high-tech firms to implement the "Fiber to the Premises" project. But the deal fell through in March 2009, after the consortium lost one of its financing partners and asked the city to contribute between $3 million and $5 million a year for the fiber network. The City Council chose not to do so.

Now, Palo Alto is putting together a business plan for a citywide fiber network and working with two consulting firms to evaluate whether and how to expand the existing network. One firm, Tellus Venture Associates, is analyzing the local market for fiber service while another firm, Columbia Telecommunications Corporation, is evaluating ways to attract private investment and considering various engineering scenarios for a citywide system.

Utilities staff plans to integrate the firms' findings into a business plan, which is scheduled to be presented to the commission in February and to the City Council in March.

TALK ABOUT IT

Do you think the City of Palo Alto should expand its fiber network citywide? Discuss the topic on Town Square, the online community discussion forum, on Palo Alto Online.

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

Comments

Posted by Joe, a resident of Barron Park
on Dec 2, 2010 at 6:02 pm

Gennady, thanks for the well written article. I liked the "from Avon, Conn., to Walla Walla, Wash" part. Nice touch.

A lot has changed since the FTTH idea was first proposed. Wire line phone is dead. Cable and satellite are about to die. Everything is going to streaming and packets. As a result, the problem of building out the other end of the pipe no longer exists and a huge capital investment isn't required. All that anyone needs and wants is packet transit. Uses can pay a la carte to a Netflix or Google and stream their own content or find their own long distance service.

Ideally, this new model can be very simple. Don't build out the entire city at once. Get your neighbors to sign up. Where there's demand, the city strings the fiber. The provider plugs you in and provides connectivity. No TV, no phone, just packet service. I'm sure there are areas in our neighborhood would jump at the chance right now. The City's part of the model already works and the City already make money on it.

Other FTTH projects ran into trouble when they got sucked into providing TV, phone and internet services which have huge infrastructure costs and couldn't compete with incumbent offerings. So, don't offer them. AT&T can stomp their feet, but they have no standing since no phone service gets offered. Same with Comcast.


Posted by Terry, a resident of Midtown
on Dec 2, 2010 at 6:51 pm

Strongly agree with Joe. I would support fiber, but have concerns about Palo Alto managing a fiber network. Joe's approach seems reasonable.


Posted by Cities-Should-Stick-To-Basics, a resident of Another Palo Alto neighborhood
on Dec 3, 2010 at 10:26 am

This is more craziness. After what, 10 years, the PAU has 49 customers? Surely they have contacted every business in town, and only 49 have signed on?

As to Fiber-to-the-Home, this idea is past dead. AT&T has wired fiber-to-the-Neighborhood two years ago. But for some reason, the U-Verse service is not available in Palo Alto. If we think back, we might remember a claim by the City that it would sue AT&T over the position of the Public Access Channels on the menu that users navigated to change channels. That news item sort of disappeared, over time, but U-Verse still is unavailable in PA.

Web Link

At&T is opening a local R&D Center in Palo Alto:

Web Link

The collaborative work center could launch a wave of financial
support for local businesses and inventors, as entrepreneurs,
equipment providers, businesses, employees and venture
capitalists join to work on new mobile-communications products.
--

So .. what exactly does the City of Palo Alto Utilities (that can not keep the power on), have to offer businesses that AT&T can not?

About five years ago, the City spent about $125K on a "business plan" for its proposed fibre offering. The fellow who was hired (Uptown Systems from Colorado) did a very unfinished piece of work, and then asked for $125K more to "finish the work". People were outraged. Even those supporting FTTH recommended that this fellow not be awarded another $125K, and so there has never been a fully functioning, and "vettable" business plan for a full-city fiber operation.

It was clear from the work done at that time, that it would require a significant penetration into Comcast's TV subscriptions, and a significant erosion of AT&T's telephone subscribers to make this plan viable. Given that Cable Coop never got more than 47% of the number of homes passed as TV customers, any claims of winning Comcast, Satellite, and AT&T customers seemed specious on the one hand, and delusional on the other--the suggestion that this would be profitable fell on deaf ears.

Since that time, IP-TV (on-line TV) has emerged. This idea was predicted to have deleterious effects on the Cable industry, but timelines were hazy. Well, the last five years, or so, have brought the impact of IP-TV on the Cable industry into focus. Netflix has seen the light and is shifting its business model to Video-on-Demand, and organizations like Hulu.com, as well as all of the major networks, and web-casting, and have begun to cut into Cable's customer base.

Internet TV Grabbing Cable TV Cord Cutters:
Web Link

Hulu boss: 'No one considers Hulu Plus or Netflix to be a cable replacement yet':

Web Link
ble
---

There are also wireless Internet providers that are emerging (WiMAX, and LTE) too. Not to mention the appearance of "smartphones" (and the iPad) that are cutting the "internet cable" for people who are mobile.

The idea that a municipal utility operation that bumbles from one screwup to another can compete in this arena is too loopy to consider.

So, what's really going on here? What's the story behind the story?


Posted by marilyn messer, a resident of Community Center
on Dec 3, 2010 at 1:38 pm

I am so happy to hear this potential good news.

I urge Palo Alto to do anything it can to get the fiber in Palo Alto.

I wonder if this means people who use comcast will not have to subscribe to comcast or AT&T. I have not been happy about the limited
choices.

Best,
Marilyn


Posted by bill, a resident of Barron Park
on Dec 3, 2010 at 2:48 pm

With the exception of utilities such as water, electricity and gas, a municipality has not shown it can compete with large, determined private industies.

As Fleming said the broadband field is evolving rapidly and is a high risk business. I cannot believe our City has shown any capability in running a private business much less where "the landscape is getting more treacherous".


Posted by Jeff Hoel, a resident of Midtown
on Dec 4, 2010 at 3:45 pm

Joe, please contact me (jeff_hoel@yahoo.com) to discuss your ideas for building out fiber-to-the-premises (FTTP) in Palo Alto. I think FTTP infrastructure costs more than you apparently do, but we both think it's worth it.

Cities-Should-Stick-To-Basics, why complain about about Palo Alto's dark fiber operation? The city is making $2 million/year (net) on its initial investment of $2 million.

You'd have to ask AT&T why U-Verse isn't available everywhere in Palo Alto; it's available in some neighborhoods. It's FTTN (fiber to the node), not FTTP. (One commentator has wryly called FTTN "fiber to the nowhere" because of its limited bandwidth compared to FTTP.)
<Web Link;

I agree with you that the FTTP business case and business plan documents written by Uptown Services (not Uptown Systems) and City staff in the 2002-2004 timeframe weren't the best, despite constructive criticism from people like me. Since then, some municipalities with vision have been launching municipal FTTP networks that seem to be headed for success.


Posted by Jeff Hoel, a resident of Midtown
on Dec 4, 2010 at 3:48 pm

Trying to fix the broken link in my previous comment:

Web Link


Posted by Cities-Should-Stick-To-Basics, a resident of Another Palo Alto neighborhood
on Dec 5, 2010 at 4:29 pm

> why complain about about Palo Alto's dark fiber operation?

Because, "Cities should stick to basics". Palo Alto has wasted a lot of time and energy investigating this very bad idea. We (as a town) have had to listen to a very small number of unqualified "entusiasts" make all sorts of claims, about how "evil" AT&T (or Comcast .. or whoever) is, because they would not provide FTTP. We had to listen to people ramble about "Utopia" (including some very ignorant City Council Members), claiming that "it's the wave of the future).

Well, here's where "Utopia" is after all this time--

Web Link

Utah's Utopia Tries To Stay Afloat

Decides to focus on small businesses
by Karl Bode Tuesday 25-Nov-2008 tags: competition business municipal

Just a few years ago, Utah was on the cutting edge of community-driven fiber networks, laying claim to two of the nation's largest municipal fiber builds. But last May, one of those networks (iProvo) was sold to Broadweave for $40 million. The other, Utopia, has so-far underperformed, with fewer subscribers than expected despite carriers offering 50Mbps fiber (a 100GB cap) for $39.95. Ed Gubbins of Telephony Online says Utopia is taking one last shot at the wholesale muni-model with a new business model, new management, and a greater focus on business lines.

Back to Broadweave and iProvo, the Salt Lake City Tribune states that there were multiple parties interested in acquiring the iProvo network, including ISPs MStar and XMission, as well as Dynamic City, the firm that runs Utopia. However, there seems to be some debate over how transparent the city of Provo was about selling the network, with some locals claiming that MStar was double crossed by Broadweave during their efforts to acquire the network.

--

Maybe it will survive, but the "wave of the future" is a'int!

> One commentator has wryly called FTTN "fiber to the nowhere"
> because of its limited bandwidth compared to FTTP.)

VDSL (which is possible via FTTN) is capable of over 100 mpbs. Folks commenting on things might want to do a little homework before getting to deeply into their commentary.

It's clear the the Palo Alto Utility does not know much about operating a Fiber Utility, and neither did the people in Utah.


Posted by Cities-Should-Stick-To-Basics, a resident of Another Palo Alto neighborhood
on Dec 5, 2010 at 5:00 pm

Oh .. and one last point .. Wireless Datanetworks will be performing almost at the level of expectation of that the enthusiasts that have been pushing FTTP have claimed was a "requirement" for Palo Alto:
---
Web Link

3. LTE Advanced has been given official 4G certification.

In order to qualify for official 4G status, wireless technologies need to achieve peak rates of 1Gbps in hotspots and 100Mbps while mobile, have to be fully IP-based and have the ability to switch between networks that include 4G, 3G and Wi-Fi.
---

We heard a few "experts" claim that "wireless could never perform like fiber". Well, while that might be true at the moment, these "experts" did not seem to give wireless development much credence.

The underlying push to have the City provide subsidized high speed fiber to the very few in town that might need it, is clearly not anything that the Charter demands of the City as a "necessary service". If people need that kind of speed, then they will be able to use wireless once of these days.


Posted by Hulkamania, a resident of Duveneck/St. Francis
on Dec 6, 2010 at 9:58 am

Interesting article about muni voice/data system.

Web Link


Posted by Kevin Ohlson, a resident of Old Palo Alto
on Dec 6, 2010 at 4:37 pm

4G, or "faux G" as it's been called, won't be near fiber speeds any time soon. 4G, at least in the US, is a marketing term that describes the thing you'll need to buy if you want a phone faster than 3G. Verizon is rolling out its next generation network (LTE, not to be confused with LTE Advanced mentioned above) and states that users can expect as high as 12 Mbps download speeds and 5 or so Mbps upload speeds.

To restate: LTE being rolled out now and over next year is several times slower than LTE Advanced, and 80x slower than fiber.

That said, I support the city's efforts to bring advanced services such as this to the citizens. PA has a long history of providing additional services. (Utilities - if you don't like PA's utility rates, you can review PG&E's rate card.) It's one of the reason we live here.

While a city in Utah may not have made it work, many cities in the US have created municipal Internet services to provide better service to their citizens. This is not just a US phenomena. Australia has spent years trying to get Telstra to provide better services, and recently broke the company in two to proceed with a National Broadband Initiative -- fiber. Also worth noting: The US is ranked well out of the Top 10 in broadband. While San Jose is ranked the fastest city in the US, it's also well out of the Top ten compared to other cities such as In places like South Korea, Hong Kong, and Singapore. This is who we are competing against in the global economy. These places didn't get faster Internet because the government stood back and waited for the private sector to get moving.


Posted by Jeff Hoel, a resident of Midtown
on Dec 6, 2010 at 5:09 pm

Cities-Should-Stick-To-Basics, Palo Alto's dark fiber operation has paid back its initial investment, and now makes $2 million/year (net), and it enables businesses to do things they couldn't do in other cities. No ideology trumps that reality.

UTOPIA and iProvo implemented excellent architectures, but they made some technical mistakes -- which other municipalities should learn from. (Don't use set-top boxes for HDTV that aren't powerful enough to do HDTV reliably. Don't use analog telephone adapters that aren't designed to work with the industry standard SIP protocol.) A November 2010 article says UTOPIA is "moving forward."
Web Link

The bandwidth VDSL2 can offer depends on distance. U-Verse has chosen to offer Internet at speeds up to 24 Mbps down and 3 Mbps up.
Web Link
It could offer something faster if it put nodes closer together, but that would cost money, so don't count on it.

Wireless continues to be much slower than FTTP. Note that the wireless bandwidths typically cited have to be shared among lots of users, but those for FTTP tend to be for a single user. Anyhow, wireless is less reliable and less secure than fiber. Also, you miss the point that fast wireless will require fiber for backhaul.

No City plan I know about has proposed that FTTP be "subsidized." Rather, it would be paid for by the people who use it, just like the City's other utilities.


Posted by Me Too, a resident of Midtown
on Dec 6, 2010 at 5:54 pm

Jeff, I don't know about the true economics of the city's dark fiber investment. But I'm not sure it matters much. If they (we) did get lucky on a small dark fiber bet, good for them. But a broken clock is right twice a day (unless it's digital, and then just once). So that doesn't mean anything about future larger investment in services.

Our city, in general, is pretty bad about how we spend our money. We have a lot of money - courtesy of large home values, Stanford mall, and a legacy utility that acts as a hidden tax - but we have under-invested in basic infrastructure (streets, buildings, storm drains) while blowing money on services and salaries (5 branch libraries, $1M children's theater, Destination Palo Alto, high paid city staff, unsustainable pension deals, etc.). We are indeed the shabby rich.

So the city spending its time and our money on unproven city utilities is hard to stomach. Like the fed and state govts, we should be spending our time figuring out how to fund our huge backlog of basic infrastructure maintenance while trimming our spending on services. My hat is off to any city council or manager who does so (Pat Burt seems to occasionally get the joke). Time spent on figuring out the tech and business aspects of a fiber service - that can come much much later. Vegetables before dessert please.


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